The role of financial decentralization in curbing inflation at the provincial level

Inflation and its fluctuations are one of the most important current problems of Iran's economy. Inflation has harmful socio-economic effects and its fluctuations are considered as one of the limiting factors of economic growth through creating uncertainty. In the past years, various programs and policies have been developed and implemented to curb inflation. Theoretical and empirical economic literature recommends financial decentralization as an effective tool in stabilizing the economy and creating regional balance. Based on this, financial decentralization through increasing efficiency, effectiveness, accountability and using regional resources and facilities can reduce production costs and increase productivity and consequently affect price control. Therefore, the main goal of the research is to investigate the impact of financial decentralization on inflation in the provinces of Iran. For this purpose, the data from the years 2014-2016 were used and the coefficients were estimated using the generalized moments method. The research results show that there is a negative and significant relationship between the decentralization index and inflation.