The Role of Knowledge-Based Economy in Controlling Inflation

In a knowledge-based economy, developing the knowledge and skills will lead to the innovation which in turn increase the productivity and revenue and reduce the inflation and unemployment. Due to the importance of applying the knowledgeto improve economic conditions, this paper has attempted to illustrate the effect of knowledge-based economy on the inflation in Iran by using annualtime series data during 1978-2011 applying Auto Regressive Distributed Lagmodel(ARDL) to test and analyze the data. The Research results show a significant correlation between the inflation rate and the knowledge based economy elements including education and human resource development, economic and institutional regime, innovation, infrastructure and information systems. The research also emphasize that this correlation will be negative in long-term for all elements except education and human resource development that it is positive. That is, by a knowledge-based economy, the inflation will be decreased in long run.