Fiscal Disequilibrium and High Inflation Rate in Iran

Fiscal Disequilibrium and High Inflation Rate in Iran

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Fiscal disequilibrium causes budget deficit.The budget deficit is usually financed by borrowing from central bank, which increases monetary base and money supply followed by a rise in price level and inflation.The process of generating revenue and financing budget deficit by creating inflation is also known as inflation tax.Relationship between inflation and income generated by this knowall.blog process is not linear.

The government income at first has increasing trend, and after reaching its maximum point would fall.It is very similar to the Lafer curve.In this paper, the inflation propensity of money velocity has been determined by using the monetary and fiscal data, which has been used to obtain the emtek 2113 optimum size of money growth.The optimum size shows that how much money should be printed by government without generating inflation.