Abstract
This paper surveys the dynamics of inflation and money growth in IRAN economy since 1990. We use the error correction model (ECM) approach and the quantity theory of money (QTM) as a general theoretical framework to examine the complex interaction among money growth, economy growth and inflation rate in the short-run and long-run. The sample of data has been since 1990:Q2 to 2011:Q1. And the results of estimation show that, inflation is not a monetary phenomenon, but it is mainly Cost-Push problem in the long-run. This empirical result is conflict to the famous statement by Milton Friedman that ‘inflation is always and everywhere a monetary phenomenon.
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