The study of the relationship between inflation and economic growth in Iran

The existence of relationship between inflation and economic growth in different countries has always been one of the disputed issues among the economists and different theoretical and empirical issues have been presented in this respect. Studying many of these issues shows that a crucial result can not be achieved about the effect of inflation on economic growth, and in respect of any country, this problem depends on the conditions and characteristics of that country. But in most studies, this result was obtained that in high levels; inflation has negative and permanent effects on economic growth. The present research seeks to study the effects of inflation on economic growth in Iran and in fact it is compiled following arising this question how the relationship between inflation and economic growth in Iran is. Since at present, Iranian economics is faced with some problems in both issues of growth and inflation compared with the developed countries, general analysis of inflation and economic growth seems useful. Based on this, long-term relationship between inflation and economic growth has been estimated for a period of the years 1971–2005 by the method of auto regressive distributed lag (ARDL). Empirical results of the study shows that first; a consistent and equilibrium relationship is obtained inflation and economic growth. Second, the relationship between these two variables is negative. Third, the estimate of error correction method (ECM) indicates high adjustment speed of this relationship towards long-term values.