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:: Volume 26, Issue 87 (Quarterly Journal Of Economic Research and Policies 2018) ::
3 2018, 26(87): 117-148 Back to browse issues page
04 Long-run Impact of Inflation Tax on Non-oil Sectors in Iran’s Economy: Investigating Friedman and Phelps Rules Using long-run Structural Approach (SVECX)
Mehdi Hajamini Dr.
Yazd University , hajamini.mehdi@yazd.ac.ir
Abstract:   (312 Views)
The optimal inflation tax rate is very controversial. Many economists follow Friedman (1969) in regarding the focus on welfare costs of the inflation tax and conclude that the optimal level of the inflation tax is zero. In contrast, some economists follow Phelps (1973) in regarding claim that the inflation tax is a kind of tax and so according to the Ramsey rule it has a positive optimal rate. The present paper investigates the effect of inflation tax on agricultural, industrial, and services sectors using a structural vector error correction model with weakly exogenous variable (SVECX) during the period 1979-2012 (available data on capital in 2017). The findings indicate that the agricultural sector is not affected by inflationary finance policies, but inflation tax and financial repression lead to decrease output of the industry and services sectors. Then the negative impact of the inflation tax is confirmed in Iran’s economy. Based on the adverse effects of the inflation tax on the output growth, it can be concluded that, according to Friedman’s rule, the "zero rate" for the inflation tax should be considered as an optimal policy in the policymaking.
 
 
Keywords: Friedman rule, Phelps rule, inflation tax, long-run structural approach
Full-Text [PDF 1219 kb]   (139 Downloads)    
Type of Study: Research | Subject: General
Received: 2017/09/7
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Hajamini M. 04 Long-run Impact of Inflation Tax on Non-oil Sectors in Iran’s Economy: Investigating Friedman and Phelps Rules Using long-run Structural Approach (SVECX). 3. 2018; 26 (87) :117-148
URL: http://qjerp.ir/article-1-1872-en.html


Volume 26, Issue 87 (Quarterly Journal Of Economic Research and Policies 2018) Back to browse issues page
فصلنامه پژوهشها و سیاستهای اقتصادی Journal of Economic Research and Policies
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