Title of article :
The Relationship between Budget Deficit and Inflation in Iran
Author/Authors :
Mohseni Zonuzi, Jamaleddin urmia university - Department of Economics, اروميه, ايران , Hashemi Pourvaladi, Mahnaz S. urmia university - Department of Economics, اروميه, ايران , Faraji, Nasrin urmia university - Department of Economics, اروميه, ايران
From page :
117
To page :
133
Abstract :
Government budget deficit has been one of the topical issues in the country s historical economic problems. The budget deficit-inflation relationship is not always obvious and it is different between countries. Since government of Iran has consistently run its economy with a budget deficit and high inflation, this paper re-investigate the deficit-inflation nexus in the Iranian economy by using quarterly data for the period of 1990:1-2007:4. To cary out a test of no structural break against an unknown number of breaks in the Iranian macroeconomic variables, we use the endogenously determined multiple break test developed by Bai Perron (2003). As, there is a structural break in the time series date, we use Perron(1990) unit root test to test of stationarity. We employ Bounds test approach to cointegration proposed by Pesaran et al. (2001) to investigate the long-run relationship between budget deficit and inflation. The key findings from the empirical studies investigating the relationship between the budget deficit and inflation indicated strong evidence towards supporting a significant and positive relationship between budget deficit and inflation in Iran. At the end, we obtained volatility of budget deficit by using GARCH model, and showed that, volatility of budget deficit has a positive effect on the inflation too.
Keywords :
budget deficit , inflation , Bounds test , volatility , GARCH , Iran.
Journal title :
Iranian Economic Review (IER)
Journal title :
Iranian Economic Review (IER)
Record number :
2567504
Link To Document :
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