Supply-Side Determinants of Inflation in Iran with an Emphasis on The Threshold Effect of Economic Growth

Document Type : Scientific paper

Authors

1 Faculty of Economics and Management, Tabriz University, Tabriz, Iran

2 Faculty of Economics and Management, University of Tabriz, Tabriz, Iran

Abstract

Inflation is one of the challenging and vital issues of economics, which has an undeniable effect on economic stability in the countries all over the world. For this reason, many researchers and policymakers have always sought to identify factors affecting inflation. In the meantime, oil price, as one of the global and strategic variables, can have a significant effect on inflation, especially in countries dependent on oil revenues such as Iran. Accordingly, considering the importance of inflation and the need to identify the causes and factors affecting it on the one hand, and the prominent role of supply side factors on the other hand, this study aims to investigate the effect of oil price fluctuations on the inflation rate considering the threshold effect of economic growth, and to identify the other supply-side factors affecting inflation rate, including technology and labor market dynamics during 1375-1401, applying the threshold regression of time series. According to the results, the oil price has a positive and significant effect on the inflation rate when the economic growth is lower than 4.303%. This effect is also positive and significant in the economic growth of above the mentioned threshold, but its amount is less. In addition, unemployment and technology have negative and significant effects on inflation rate, which respectively confirm Phillips theory and Solow growth theory. However, population size has a positive and significant effect on inflation rate.

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History

  • Receive Date: 24 June 2024
  • Revise Date: 20 July 2024
  • Accept Date: 21 July 2024

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