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  The aim of this study is to review the causal relations between TFP growth and inflation as one of the attracting issues in Macroeconomic literature. For the first time in Iran, we have used the wavelet decomposition technique to study this relation. Both TFP growth and inflation series between 1960-2006 are decomposed up to three levels. Our analysis of causality relations between all the composed and decomposed series shows that though no statically meaningful effect between original series has been proved, there are some negative relations between decomposed series in first and second level. Moreover, our study reveals some previously unknown spillover effects between various frequencies of both series as explained in paper. Finally, on the basis of relations founded between decomposed series of inflation in different frequencies, we introduce a new instrument to measure the volatility of inflation.

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The concept of “Innovation” has changed considerably in recent years. According to new theories, the innovation emerges in a system of interrelated elements and determinants during which the idea changes to a commercialized output or process. The literature on the innovation has concentrated mainly on various aspects of innovation chain separately. In this paper we tried to investigate the general effects of the whole elements of the innovation chain simultaneously. These elements are: R&D expenditures, physical capital formation, human capital and patent filling (residence and non-residence). We utilized multivariable time-series methods including cointegration and vector error correction model (VECM) to assess the long-run effects of innovation elements on total factor productivity in Iran. Results show that excluding the human capital variable, other elements of innovation chain have positive effects on TFP among them, residence and non-residence patent filling having the normalized long-run coefficients of 0.58 and 0.48 respectively, are the most important factors affecting TFP in Iran.