The Iranian rial has lost about a third of its value over the last year, burnishing claims that the economy is stumbling. But while the devaluation is concerning, it does not point directly to real economic weakness. As such, it looks less like a hedge to protect assets and more like a bubble in which Iranians are investing enthusiastically.

In his recent piece for Al-Monitor, Iranian business consultant Bijan Khajehpour looked at six drivers of the devaluation: first there are issues of management and policy at the Central Bank of Iran such as the longstanding differential between the official and free market exchange rates, the reported challenges that CBI is facing in repatriating foreign currency and the central bank’s troubled interventions in the currency market as it tried to arrest the loss in the rial’s value. These might be considered “supply-side” drivers of the devaluation as they pertain to the availability of hard currency in the market. On what we can call the “demand-side,” there is inflationary pressure, overall demand for return on investment and the psychological state of the market. To better understand these factors, one can look at the data from the past Iranian year, which ended March 20.

First, there is inflation, drawing on data reported monthly by the CBI. Second, one can track fluctuations in the housing market using the average price per square meter for residential real estate transactions, also reported monthly by the CBI. Third, one can include the rial price of 18-karat gold using the month-end price. Finally, one can compare the month-end official dollar exchange rate with the free market rate.

When tabulating and indexing this data over a 12-month period, the acceleration of the rial’s weakening is immediately clear. The price of gold rose 30.15 points while the free market price of the dollar rose 30.75 points — nearly double the increase in the official exchange rate in the same period.