study of relationship between inflation and economic growth in Iran Kalman filter approach and implicit trend concept

Document Type : Scientific-research

Authors

1 PhD in Economic Sciences, Head of the Quarterly Accounts of the Economic Accounts Department in Statistics Center of Iran

2 PhD in Economic Sciences, Expert of Meli Bank of Iran

10.30465/ce.2024.48159.1950

Abstract

In the current research, by applying the Barrow model and using the Kalman filter approach and the concept of implicit trend by introducing an unobservable variable, the relationship between inflation and economic growth in Iran during the period of 1353-1401 was investigated. In this research, the variables of capital stock, labor force, life expectancy, literacy rate, exchange rate margin, inflation rate, inflation squared and gross domestic product were used. Also, in order to compare the results of estimating the effect of inflation on economic growth and to examine the long-term results, the autoregressive distributed lag model (ARDL) was used. The results indicate that the threshold level of inflation is 16.9% in the short term and 9.4% in the long term. Therefore, it is recommended that the targeting of the inflation rate lower than these levels should be considered. Also, the relationship between labor force, capital, life expectancy and literacy rate variables with positive and significant economic growth was estimated and the negative relationship between exchange rate margin and economic growth was confirmed. Therefore, to increase economic growth in Iran, the policies of increasing employment, increasing capital stock and reducing the exchange rate margin are recommended.

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References

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Journal of Iranian Economic Issues
Volume 10, Issue 2 - Serial Number 20
February 2024
Pages 167-201

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History

  • Receive Date: 30 January 2024
  • Revise Date: 27 April 2024
  • Accept Date: 06 May 2024

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