Identification and Analyzing Of Effective Factors Elastics on Inflation Function in Iran by Using ARDL Methodology

DOI: Hamid Reza Izadi, Maryam Izadi

Authors: 10.5176/2010-4804_2.2.190

Abstract:

We estimated the function of inflation for the period (1971-2009) by using the autoregressive distributed lag (ARDL)
method. In addition, we used the error correction model and stability tests. According to our findings, the explanatory variables include gross domestic production, saving, government expenditure, liquidity and import. The results show that there is a long-run equilibrium relationship between the variables. According to our findings, the liquidity and government expenditure have positive impact on the inflation and gross domestic production; saving and import have insignificant negative effects on the inflation in Iran. The Error Correction Model (ECM) is about 73 percent, which indicates amount deviation of equilibrium. Furthermore, the stability tests show if the inflation function is stable, therefore the two tests confirm that the stability of the inflation function is existent.

Keywords: Inflation, Stability, ECM, Gross Domestic Product, Liquidity, Import, Saving, Government Expenditure