EconPapers    
Economics at your fingertips  
 

The Relationship between Budget Deficit and Inflation in Iran

Jamaleddin Mohseni Zonuzi, Mahnaz S.Hashemi Pourvaladi and Nasrin Faraji
Additional contact information
Jamaleddin Mohseni Zonuzi: Assistant professor; Department of Economics, Urmia University
Mahnaz S.Hashemi Pourvaladi: Graduate student; Department of Economics, Urmia University
Nasrin Faraji: Graduate student; Department of Economics, Urmia University

Iranian Economic Review (IER), 2011, vol. 16, issue 1, 117-133

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. (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
ftp://80.66.179.253/eut/journl/20111-7.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eut:journl:v:16:y:2011:i:1:p:117

Access Statistics for this article

Iranian Economic Review (IER) is currently edited by Dr.Hossien Abbasinejad

More articles in Iranian Economic Review (IER) from Faculty of Economics,University of Tehran.Tehran,Iran Contact information at EDIRC.
Bibliographic data for series maintained by [z.rahimalipour] ().

 
Page updated 2019-06-20
Handle: RePEc:eut:journl:v:16:y:2011:i:1:p:117