Test of Monetary Inflation and Identity Causes of Inflation (The Case of Iran) 1338-1387

The purpose of this study is the monetary inflation test in Iran’s economy and the identification of influential factors in inflation by estimation of two different econometrics models and during the period of a century half, i.e. the years between 1960-2009. So the current study aims at not only focusing on the direct impacts of volume of money and liquidity on inflation in the frame of monetary theories, but also distinguishing the other effective factors on inflation like gross domestic products, the exchange rate in the market parallel, imported price index, domestic interest rate, foreign interest rate and oil incomes in order to estimate the importance of these factors in forming the inflationary pressures. indeed two models of different econometrics would be estimated in order to study the relations among the aforementioned variable and the level of general prices. The stationary tests on the variables show that some variables of I(0) and I(1) are to be confronted, Accordingly the method of auto-regressive distributed lag (ARDL) are applied to estimate these kinds of models. The outcomes of the study show that 1- there is a kind of positive and meaningful relations between the inflation and liquidity in Iran’s economy, but this relation is not one to one; 2- the inflation phenomenon is not just the monetary one in Iran’s economy; 3- increase of liquidity content is one of important factors in causing inflation in Iran’s economy, but it is not the most important factor;4- except for the content of liquidity there are some other influential factors in causing inflation like gross domestic product, the imported price index,domestic interest rate, foreign interest rate and oil incomes.