Empirical Investigation of the Impact of Core Inflation on Economic Growth in Iran: Application of MIDAS Models

Document Type : Research Article

Authors

1 Economic affairs research institute

2 Khatam university

3 Ph.D student of Allameh Tabataba'i University

Abstract

From the monetary authority perspective, all parts of fluctuations in CPI don’t have the same importance for implementing monetary policy and also don’t have the same impact on economic growth. The CPI fluctuations can be separated into two main parts: the permanent part and the temporary or transient part. In the long run the changes in relative prices which are originated from temporary shocks, because of price flexibility and substitution of goods by consumer, will be adjusted and as a result will not have significant effect on Inflation and economic growth.  Consequently, monetary authority should not take into account the temporary part of CPI fluctuations in implementing the monetary policy. Some economists assert that it will be better if monetary authority implements the policies just based on the core inflation. In the present study, we have first calculated the core inflation and then investigated the effect of core inflation on economic growth. To this end, we have used the data over the 2005-2018 period and MIDAS method. Results indicate that financial depth, core inflation and oil revenues have negative and significant effect on economic growth. Also, results show that openness, government spending on infrastructure, capital stock and active population have significant and positive effect and employment permits have no significant effect on economic growth

Keywords

References

پیرایی، خسرو و دادور، بهاره (1390). «تأثیر تورم بر رشد اقتصادی در ایران با تأکید بر نااطمینانی، پژوهش‌های رشد و توسعه پایدار»، پژوهش‌های اقتصادی، شماره 11(1)، 67-80.‎
شاکری، عباس؛ جهانگرد، اسفندیار و اقلامی، سمیه (1392). «اثر غیرخطی تورم بر نابرابری درآمد در ایران»، فصلنامه پژوهش‌های اقتصادی (رشد و توسعه پایدار)، 4، 27-53.
جعفری صمیمی، احمد و قلی‌زاده، صدیقه (1386). «بررسی رابطه تورم و رشد اقتصادی در کشورهای درحال‌توسعه: شواهدی جدید»، فصلنامه نامه مفید، 13(63)، 45-58.
مهرآرا، حسن؛ علی‌نژاد مهربانی، ابراهیم و خندان سویری، مهدب (1394). «تورم و اصلاحات اقتصادی برای کنترل آن: با رویکرد اصلاح واحد پول ملی»، فصلنامه پژوهش‌های پولی-بانکی، 25، 379-399.
فلاحی، فیروز؛ اصغرپور، حسین؛ متفکرآزاد، محمدعلی و منتظری شورکچالی، جلال (1390). «تأثیر تورم بر رشد اقتصادی در ایران: با استفاده از مدل رگرسیون انتقال ملایم (STR). مطالعات و سیاست‌های اقتصادی»، سیاست‌های اقتصادی-نامه مفید، دوره 8(18): شماره 1(90)، 47-64.
کرمی، هومن، بیات، سعید. (1392). «ارزیابی و مقایسه روش‌های اندازه‌گیری تورم هسته در ایران»، پژوهش‌های پولی و بانکی، شماره 17، 83-103.
موسوی، سید حبیب­الله و سلطانی، شیوا (1396). «تحلیل تورم، رشد تولید و پایداری اقتصادی در ایران»، پژوهش‌های رشد و توسعه پایدار (پژوهش‌های اقتصادی)، 17(3)، 99-77.
Aizanman, J, Hutchison, M, Noy, I, (2010). “Inflation targeting and real exchange rates in emerging markets”. Journal of World Development, 39(5), 712-724.
Akinsola, F. A., Odhiambo, N. M. (2017). “Inflation and Economic Growth: a Review of The International Literature”. Comparative Economic Research, 20(3), 41-56.
Barrera, A. T., Pennings, J. M. E. (2013). Energy and Food Commodity Prices Linkage: An Examination with Mixed.
Bruno, M., Easterly, W. (1998). “Inflation crises and long-run growth”, Journal of Monetary Economics, 41(1), 3-26.
Bryan, M. F., Cecchetti, S. G. (1994). “Measuring Core Inflation”, The University of Chicago Press, 195-219.
Clements, M., Galvao, A. (2008). “Macroeconomic Forecasting with Mixed Frequency Data: Forecasting US output growth”, Journal of Business and Economic Statistics, 26(4), 110-117.
Foroni, C., Marcellino, M. (2013). “A Survey of Econometric Methods for Mixed-Frequency Data”, SSRN Electronic Journal, 1-43.
Gamber, E. N., Smith, J. K., Eftimoiu, R. (2015). “The dynamic relationship between core and headline inflation”, Journal of Economics and Business, 81, 38-53.
Ghysels, E., Sinko, A. and Valkanov, R. (2007). MIDAS Regressions: Further Results and New Directions”, Econometric Reviews, 26(1), 53-90.
Leon, A. J., Nave, M., and Rubio, G. (2007). “The relationship between risk and expected return in Europe”, Journal of Banking and Finance, 31(2), 64-73.
Kalai1, M., Boujelbene D. T. (2017). “Core Inflation Measure and Its Effect on Economic Growth and Employment, in Tunisia”, The Romanian Economic Journal, 66(4), 36-54.
Malla, S. (1997). Inflation and economic growth: Evidence from a growth equation, Department of Economics, University of Hawaiâ™ I at Monoa, Honoulu, USA.
Marcellino, M. and Schumacher, C. (2007). “Factor MIDAS for Nowcasting and Forecasting with Ragged-Edge Data: A Model Comparison for German GDP”, Oxford Bulletin of Economics and Statistics, 72, 518-550.
Engemann, M. T. K. M., Owyang, M. T. (2010). Forecasting with Mixed Frequencies, Federal Reserve Bank of St, Louis Review 92.
Quah, D., Vahey, S. P. (1995). “Measuring Core Inflation”, The Economic Journal, 105(432), 1130-1144.
Ricardo, J., Francisco, G. (2001). “Does high inflation effect growth in the long and short run?”, Journal of Applied Economics, Vol, IV, No. 1, 89-105.
Rich, R. W., Steindel, C. (2005). A review of core inflation and an evaluation of its measures, Federal Reserve Bank of New York Staff Report No. 236, December.
Sargent, T. and Wallace, N. (1981). Some Unpleasant Monetarist Arithmetic, federal reserve bank of Minneapolis quarterly review, fall.
Silver, M. (2006). Core Inflation Measures and Staticstical Issues in Choosing Among Them, International Monetary Fund Working Paper, WP, 06/97.
Svensson, L. E. O. (1997). “Inflation forecast targeting: Implementing and monitoring inflation targets”, Journal of European Economic Review, 41(6), 1111 -1146.
Frequency Data, Selected Paper prepared for presentation at the Agricultural, Applied Economics Association (2013). AAEA & CAES Joint Annual Meeting, Washington, DC, August 4-6.
 
Journal of Applied Economics Studies in Iran
Volume 8, Issue 30
September 2019
Pages 1-23

Files

Share

How to cite

Statistics