Revisiting the Relationship between Economic Growth and Inflation in Iran Using Time-Frequency Analysis
Volume 25, Issue 85, Winter 2021, Pages 91-115
https://doi.org/10.22054/ijer.2020.43207.765
Mohammad Abdi Seyyedkolaee, Saleh Taheri Bazkhaneh
Abstract The relationship between economic growth and inflation is one of the long-standing issues in macroeconomics, which is theoretically and politically confronted with many controversies. This is especially important for the Iran's economy, which seeks to achieve price stability and accelerate economic growth. In this regard, the present study has used continuous wavelet transformation to provide a new insight into the relationship between economic growth and inflation with time-frequency analysis in 1369:2–1397:2. The results show that in the long run (more than 4 years), an increase (decrease) in economic growth is accompanied by a decrease (increase) in inflation. In addition, the increase in economic growth has caused inflationary pressures in limited form and in short run (1380-1383). Therefore, it is recommended that policy makers focus more on economic growth in the long run.