Economists pay considerable attention to the influential factors on the economic growth in the framework of the growth models. In the same direction, the relationship between inflation and economic growth in Iran has been investigated during 1978-2008. First, an adjusted model has been designed based on (Barro) model and then the relationship between inflation and economic growth has been estimated using both ARDL and rolling linear regression models. The results derived from the both estimated models showed that the effect of inflation on economic growth is negative and Significance.
This study with its monetary viewpoint and in the form of P* model surveyed to test the money affect on inflation in Iranian economy. To achieve this goal OLS, ARDL techniques were used during 19792008. It should be noted that only the standard P* model (domestic price gap) were tested in this study. Considering that domestic price gap consists of output gap and velocity gap, the Hedrick–Prescott filter method is used to estimate the potential production levels and the velocity. Estimation results of various models show that the standard P* model (domestic price gap) is not able to explain and forecast inflation in Iran.
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