The Asymmetric Effect of Inflation on Economic Growth in Iran: Nonlinear ARDL Approach

Low inflation and sustainable growth have been the major macroeconomic goals being pursued by every country; Iran inclusive. The main purpose of this study is to investigate the asymmetric effects of inflation on economic growth using Nonlinear auto regressive distribution lag (NARDL) during 1376 to 1399. Based on the research results using this model and the explanatory variables including liquidity volume, labor, net capital stock and government expenditure, the asymmetric effect of inflation on Iran's economic growth in the long run has been confirmed. This result indicates that increasing and decreasing inflation have different effects on economic growth. Moreover, in the long run, rising inflation has had negative and significant effects on GDP in Iran. In addition, in the long run, the impact of rising inflation on Iran's economic growth has been greater than the effect of lower inflation. In the short run, there was no evidence of either positive or negative effects of inflation on economic growth. Also, the variables of liquidity volume, labor, net capital stock and government expenditure have been effective on economic growth both in the short and in the long run.