Document Type : Research Paper
Authors
1
Ph.D. Candidate in Economics, Department of Economics and Accounting, Islamic Azad University, Central Tehran Branch, Tehran, Iran
2
Assistant Professor, Department of Economics, Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran.
3
Assistant Professor, Faculty of Economics and Accounting, Islamic Azad University of Central Tehran, Tehran, Iran
Abstract
Evaluating the factors that contribute to inflation in a country's economy is crucial for several reasons. Beyond its economic implications, inflation can lead to significant social and political consequences. This study examines the impact of various factors—such as interest rates, liquidity, budget deficits, and government debt to banks—on Iran's inflation rate, using the NARDL econometric approach for the period from 1993 to 2021. The long-term findings indicate that a positive shock in liquidity has a direct positive effect on the inflation rate. Similarly, a positive shock in the budget deficit also leads to an increase in inflation in Iran. Conversely, an increase in interest rates has an inverse relationship with inflation, meaning that as interest rates rise, the inflation rate tends to decrease. Additionally, a positive shock in government debt to banks contributes positively to the inflation rate. Based on the study's results, it is recommended that the budget deficit be financed through methods other than borrowing from the central bank. This approach could help break the connection between the budget deficit, liquidity, and inflation. Furthermore, reducing bank lending interest rates may lower production costs, ultimately helping to control inflation by alleviating cost pressures.
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