TY - JOUR ID - 57496 TI - The Study of Relationship between Interest Rate and Inflation in Iran JO - Journal of Economics and Modelling JA - JEM LA - en SN - 2476-5775 AU - Davoodi, Parviz AU - Zolghadri, Mahdi AD - Department of Economics,Faculty of Economics and Political Science, Shahid Beheshti university AD - M.A. in Economics Y1 - 2012 PY - 2012 VL - 2 IS - 7-8 SP - 1 EP - 25 KW - Interest Rate KW - Inflation KW - Financial Cost KW - Fisher Effect DO - N2 - In the economic theory, there is a strong relationship between interest rates and inflation. During recent years, some of most prominent policies has been proposed to reduce the indicative profit rates in the banks with an intention to curb the prevailing inflation, enhance investment and finally the employment in the country. In this research, the share of financial costs was calculated as one of the production costs for active companies in Iran's stock market. It was shown that financial costs are approximately 15-50 percent of production costs. The financial costs share in the GDP was estimated about 33-38 percent of GDP. This paper employs Johansen-Juselius and Error-Correction Models to investigate the existence of a long-run relationship and the causality between two mentioned variables. They illustrate that the causality is from interest rate to inflation rate. Due to high proportion of financial costs in the costs of firms, interest rates can be reduced to decrease inflation. UR - https://ecoj.sbu.ac.ir/article_57496.html L1 - https://ecoj.sbu.ac.ir/article_57496_f1e30832f9d08a4465495553b14619a6.pdf ER -