Analysis of the Effect of Inflation on Unemployment in the Provinces of Iran: A Spatial Econometric Approach

Inflation is one of the main issues in macroeconomics and one of the main concerns of many countries. In recent years, the existence of rapid inflation due to economic sanctions and the lack of injection of oil revenues has weakened the performance of macro variables, including the increase in the unemployment rate and its spillover effects on all the provinces of the country, especially the underdeveloped and poor provinces. Is. Therefore, it is necessary to examine the effective factors in the direction of control, stability of the inflation rate, and chronic reduction of the unemployment rate. Therefore, the current research aims to analyze the spatial effect of inflation on unemployment in the provinces of Iran with a spatial econometric approach during the period of 2006-2021. Before estimating the spatial model, spatial spillover effects for the spatial auto regression model were confirmed using Moran’s, Jerry C’s, and spatial F tests. Based on the obtained results, the inflation rate and its proximity effects have negative and significant effects on the unemployment rate of the studied provinces. According to other results, it has been observed that the gross domestic product and credits for the acquisition of capital (construction) assets and the logarithm of human capital have a positive and significant effect on reducing the unemployment rate; meanwhile, the wage rate has a negative and significant relationship with the reduction of the unemployment rate in the provinces. It is suggested to move simultaneously in the direction of stabilizing the inflation rate and increasing the employment rate to increase the competitiveness of production for the less developed and poor provinces.