Inflation; Inflation Uncertainty; Investment growth and Economic Growth in Iran

Subject Areas : Applied Economics

امیر غلامی ¹ ( مسئول مکاتبات )
اکبر کمیجانی ² ( ندارد )

Received: 2011-01-15 Accepted : 2011-07-06 Published : 2010-12-22

Keywords: Inflation, Inflation Uncertainty, Investment growth, Economic&#x0D, &#x0D, Growth,

Abstract :

This study investigates the relationship between inflation; inflationuncertainty; investment growth and economic growth, over the period 1367‐1387 in Iran. We used Trivariate‐GARCH model and our results indicate thatthe hypothesis of Friedman (1977) and Ball (1992) concerning that theincrease in inflation rate, leads to inflation uncertainty, is not rejected for Iranduring the period of our study. Thus, we conclude that any variable thatincreases the rate of inflation, leads to inflation uncertainty and consequentlyreduces the economic growth in Iran. Therefore it is helpful if governmentpursue an inflation targeting policy. Our results also confirm that any increasein inflationary uncertainty reduces the rate of investment and production asindicated by Bernanke (1983); Dixit &Pyndyk (1994) and Friedman (1977).Finally our model rejects the hypothesis of Holland (1995) i.e. there exist anegative causality between inflation uncertainty and inflation rate.