Investigation of interactions between deficits and inflation in Iran

چکیده مقاله

When economy is in a thriving period,  certainly government revenues will be risen, and at the same time government spending increases, but when condition is changed and recession begins, government revenues is drastically decreases, but government spending does not experience much change. Hence, deficit problem is arisen.On the other hand when the economic is exposed to recession, the government has to put their costs at a level not keep up the filling of vacancies private sector investment, market creation request from the government deficits are, but how to provide it is very important to the financial and different effects.  General government budget deficit in the economics literature in three ways; foreign borrowing, domestic borrowing (bonds) and borrowing from the banking system takes place. Each of them specific results will follow.

This paper evaluates interaction of the budget deficit and inflation in the economy, which assesses model variables of annual statistics for the period 1981 to 2014. Because the variable deficit is a negative value of this variable cannot be the natural logarithm and to better estimate the homogenization coefficients and other variables in the model template to form the natural logarithm of the study.  According to statistics computation to model variables, variables impact the budget deficit, GDP and oil revenues during the period of study is significant at a confidence level of 95%. GDP variable impact on the inflation rate is negative. Also in accordance with the result of estimating models, variable impact of the deficit on inflation is positive. In connection with the variable impact of oil revenues, according to estimates of the model can be said with rising oil revenues, inflation also rises this may be due to increased demand in the community. So oil revenues has a positive effect on inflation.

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