The Effect of Governance Index on Inflation in Selected Countries of G77

Inflation is one of macroeconomic variables and in the economic planning; special attention is placed on it. Inflation could cause undesirable phenomena economic-social such as poverty, inequality and corruption. In study the creator and controller factors of inflation, there have been many discussions and factors such as monetary variables, excess demand and structural factors are discussed. One of the factors that could effect on inflation is economic security through such stability in the rules, create reassure among entrepreneurs, and reduce corruption and rentier. In this regard, in this study authors investigate effect of governance index on inflation among selected countries of G77 for period 1996-2015. The results indicate that governance index on inflation has negative and significant effect. Also, the results show that effect of variables of expected inflation, difference of liquidity growth rate and economic growth rate and natural resources have positive and significant effect on inflation. The interaction of variables governance index with natural resources on inflation is positive and significant.