International Academic Journal of Economics

  • ISSN 2454-2474

Nonlinear Relationship between Inflation and Economic Growth

Shahram Fattahi, Ali Tiatoraj and Nima Moshtaghic

Abstract: Economists have been paying special attentions to the factors affecting economic growth. The related literature shows that inflation is a crucial factor in this regard. Therefore, the relationship between inflation and economic growth matters for policymakers. This paper examines this relationship in Iranian economy. We have designed a model and estimated it using econometric techniques. A model with lags has also been estimated. The findings of the paper are(1) Inflation, in low levels ( less than ten percent ) does have a positive effect on economic growth, (2) For medium levels, the relationship between inflation and economic growth are negative just up to 26 percent for one period, (3) For high levels ( which over 26 percent in our study ), all inflation rates above 26 percent do, have negative impact on economic growth, (4) Finally, we ,based on causality Granger testing model, have showed that there is a significant relationship from inflation to growth ( and not vice versa). installateur notdienst wien

Keywords: Inflation, Economic growth, CLS, Causality Granger, Iranian Economy

Page: 43-58

Volume 1, Issue 1, 2014