The Effect of Economic Environment and Financial Corruption on Economic Discomfort: Evidence from Iran

The main purpose of this study is to examine the impacts of economic factors and financial corruption on economic discomfort in Iran from 1975 to 2010. Economic discomfort, defined as the sum of the unemployment rate plus the annual rate of inflation. Unrestricted Error Correction Model (UECM) is employed to do bounds test and to examine the presence of cointegration. The results indicate that, in the short run, economic discomfort decrease as financial corruption, trade openness and interest rate increase. Even so, it increases as income inequality increase. Besides, in the long run, except for interest rate, financial corruption and income inequality are positively associated with economic discomfort. Indeed, interest rate having adverse impact on economic discomfort. The effects of other variables are not confirmed.