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The Effect of Inflation on Finance-Growth Causality in Iran | ||
| فصلنامه مطالعات اقتصادی کاربردی ایران | ||
| Article 11, Volume 8, Issue 29, May 2019, Pages 269-299 PDF (849.85 K) | ||
| Document Type: Research Article | ||
| DOI: 10.22084/aes.2019.17671.2752 | ||
| Authors | ||
| masoud nikooghadam1; Mohammad Ali Aboutorabi* 2 | ||
| 1Assistant professor of economics, University of Bojnord, Iran. | ||
| 2ail.com" Aboutorabi Assistant Professor in Economics, Institute for Humanitie | ||
| Abstract | ||
| Dominant economic theory assumes a positive relationship between financial development and economic growth. Contradictorily some empirical evidence shows that the strength of this relation and even its sign heavily depends on economic circumstances of each country. One of the most important determinants of finance-growth nexus is inflation. Specially, in many developing countries which have been experienced higher inflation and poor macroeconomic stability, studying the role of inflation on finance-growth nexus is crucial. This paper tests tri-variate causality among economic growth, financial development and inflation rate in Iran during 1961 to 2016 by using VECM model. Comparing two-variate and tri-variate causality tests reveals that adverse causality from growth to some financial development indicators is caused by high rates of inflation. Moreover, high stable inflation in Iran weakens the causality from some other financial development indicators to economic growth. | ||
| Keywords | ||
| financial development; financial stability; inflation; Economic growth; causality test | ||
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| References | ||
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