Abstract for: The study of inflation effects on Iran Large Industrial Workshops profit: combiniaion of system dynamics and econometrics

In the most of the done studies, such as Anindya Banerjee & Brill Russell (2005) and Anindya Banerjee & at el. (2001), inflation has a negative effect on markup. In this paper, the effects of inflation on profit of big industrial companies have been inspected. The variables such as inflation, international CPI levels, profits of agencies, sale (income), total costs, cost of R&D, total factor of product (TFP) and quality of products are being inspected. In this study, first the relation between the variables have been estimated by using panel data during 2000-200, then the accuired results were simulated by system dynamics method, we used from Vensim PLE,. The results show that the inflation causes more increase in incomes than expenses of agencies and finally the profit increase. The reason is that because the agencies don’t respect the standards of the products –in inflation conditions-, they generally can decrease the quality of the products and as a result increases the prices of their product.