Inflation and Productivity in Iran, Cointegration Tests in the Presence of Structural Breaks

In this paper, we analyze the long –run relationship between inflation and Total Factor Productivity (TFP) in the Iranian economy during 1338-1380. For this purpose, we use Gregory –Hansen (1996) Cointegration test. Our Study proceeds at the following steps. 1. We set up a multivariate model for the analysis of the long-run relationship between inflation and Total Factor Productivity (TFP)2. We test the unit root properties of data, and the long-run relationship between variables in the presence of structural breaks.3. We estimate endogenously the break point data.Our results from cointegration tests and dynamic ordinary least square estimator show that there is a negative relationship between inflation and productivity.