Nonlinear effects of inflation on Iran's economic growth: The NARDL approach

Khalili, Rahele; Peykarjo, Kambiz; Hojabr Kiani, Kambiz; Memarnejad, Abbas

doi:10.22075/ijnaa.2022.26859.3428

Nonlinear effects of inflation on Iran's economic growth: The NARDL approach

Document Type : Research Paper

Authors

Rahele Khalili ¹

Kambiz Peykarjo ¹

Kambiz Hojabr Kiani ²

Abbas Memarnejad ¹

¹ Department of Economics, Science and Research Branch, Islamic Azad University, Tehran, Iran

² Department of Economics, University of Shahid Beheshti, Tehran, Iran

10.22075/ijnaa.2022.26859.3428

Abstract

This article examines the nonlinear effect of inflation on Iran's economic growth. So far, many studies have been conducted on Iran's economic growth in which different estimation methods have been used. The dependent variable of this research is GDP per capita as an indicator of economic growth and the variables of inflation rate, investment, labor force, oil export revenue and government expenditures have been used as explanatory variables. In the present study, the effect of inflation rate on Iran's economic growth has been investigated asymmetrically using the nonlinear distribution interrupt (NARDL) model with a boundary approach. The research period is 1989 to 1397 and the data are annual. The results of the boundary test indicate the existence of a long-term relationship between the research variables. Investment variables and government expenditures have positive and significant effects, labor has a negative and significant effect, and oil export earnings do not have a significant effect on economic growth. Also, negative changes in inflation have a negative and significant effect, while positive changes in inflation are meaningless, and thus the asymmetric effects of inflation on Iran's economic growth are revealed.

Keywords

Nonlinear Effect

Inflation Rate

Economic Growth

Self-Return Pattern with Asymmetric Distribution Interval (NARDL)