The Impact of Exchange Rate and Gold Price Volatility on Income Inequality in Iran (A Quantile Regression Model Approach)

Document Type : Original Article

Authors

1 PhD student in Economics

2 assistant professor

Abstract

Introduction: Income inequality is one of Iran's most significant economic challenges, influenced by macroeconomic fluctuations such as exchange rate and gold price volatility. This study, employing recent evidence and considering the differential sensitivity of various income groups to price changes, investigates the impact of these volatilities on income distribution across different deciles of Iranian society.

Method: The primary objective of this study is to examine the effect of exchange rate and gold price volatility on income inequality in Iran. Utilizing annual time-series data from 1981 to 2024 and adopting a Quantile Regression Decile Model, the study analyzes the impact of key variables and controls including exchange rate volatility, gold price volatility, inflation rate, per capita GDP, unemployment rate, human capital, trade volume, gross fixed capital formation, and oil price volatility on various income levels.

Findings: Estimation results indicate that exchange rate and gold price volatilities have a significant positive effect on income inequality, with impacts being considerably more pronounced in lower income deciles. Conversely, per capita GDP, human capital, trade volume, and gross fixed capital formation demonstrate a significant negative effect, contributing to reduced inequality. Conversely, unemployment rate, oil price volatility, and inflation emerge as the most critical factors exacerbating inequality, particularly in the lower deciles. The pattern of variable impacts across all deciles highlights the asymmetric response of the Iranian economy to exchange rate and price shocks.

Discussion: Based on the findings, exchange rate and price volatilities disproportionately alter income distribution to the detriment of lower deciles. Therefore, economic stability, inflation control policies, human capital development, and channeling productive investment can be effective in reducing the income gap.

Keywords

Main Subjects

References

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History

  • Receive Date: 31 May 2026
  • Revise Date: 08 September 2026
  • Accept Date: 13 September 2026

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