Volume 11, Issue 1 (2011)                   QJER 2011, 11(1): 67-80 | Back to browse issues page

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Piraee K, Dadvar B. The Effect of Inflation on Economic Growth in Iran with Special Emphasis on Uncertainty. QJER. 2011; 11 (1) :67-80
URL: http://ecor.modares.ac.ir/article-18-91-en.html
1- Associate Professor of Economics, Islamic Azad University Shiraz Branch
2- M.A. in Economics
Abstract:   (31004 Views)
Hyper inflation rates impose direct and indirect costs upon society. It has undesirable consequences that are caused by inflation uncertainty. In this regard, the following questions are raised: How do inflation rate and its uncertainty affect economic growth? Does the structural breakpoint affect relationship between inflation and growth rate? In this study the above questions are examined for the Iran's economy in period 1974-2007. For this purpose the regressive model is applied. In this model, growth rate of GDP depends on inflation rate, growth rate of the money supply, growth rate of the real gross fixed capital formation and inflation uncertainty. For the measuring inflation uncertainty Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model is used. Based on data analysis, structural break point occurs at inflation rate equal to 20 percent. Results show that the impact of inflation rate on economic growth is significantly negative but it minimizes at the rate of less than 20 percent and increases at the rate of more than 20 percent. Moreover, inflation uncertainty has significant and negative effect on growth.
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Received: 2010/01/19 | Accepted: 2011/02/27 | Published: 2011/04/30

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