The Nonlinear Effect of Inflation on Income Inequality in Iran

In the economic literature، inflation is one of the most important factors influencing income inequality. Since Iran as a developing country has frequently been facing with high and volatile inflation rates، the study of the effect of inflation on income inequality is of considerable importance. Despite the importance of the issue، the few studies that have dealt with this subject have not derived same result، so the effect of inflation on income inequality remains paradoxical. However، the economic studies in recent decades confirm the nonlinear relationship between inflation and income inequality. Inspired by these studies، we investigate the nonlinear effect of inflation on income inequality during 1971-2006. Likewise، we examine the Granger causality relationship between inflation and income inequality by using “Toda & Yamamoto” and “Error correction” procedures during 1971-2007.