2011•Unpublished venueRequires access
Inflation Tax and Economic Growth in Iran
Ahmad Jafari Samimi, Reza Moghadassi, Khosro Azizi, Amir Varsanjvar
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Abstract
In public finance governments may finance their budget deficits through borrowing from central banks. This method of financing called seigniorage consists of two parts. One part is change in money necessary for economic growth .This part is occurred even when inflation is zero. However, the second part called inflation tax is money creation through Inflation which reduces the real money balances .It acts like a tax by reducing the purchasing power of the money income. The purpose of this paper is to analyze the effect of inflation tax on economic growth in Iran during 1971-2006. Our findings based on estimated regression models indicate that there is a negative and significance relationship between Inflation tax and economic growth in Iran. Therefore, it is suggested that government to concentrate on non-inflationary methods of financing government expenditures through tax reforms or public borrowing.