Relationship of budget deficit, inflation and value of money are some controversial issues mostly discussed in macroeconomics as a main concern of policy makers and economists in both developed and developing countries. Policy of budget deficit is known as one of the fiscal policies resort widely applied in most countries specifically in Iran. What is the relationship between budget deficit and macroeconomics variable, as the main focus of this study, has remained unanswered for a long time. Based on empirical studies, statistics show that the budget deficit and inflation relationship are not the same among countries sampled in this research. This research paper tends to analyze and examine the theoretical and empirical relationship of budget deficit and inflation during ١٩٧٦ – ٢٠٠٥. Applying econometrics tests to evaluate the correlation between inflation and budget deficit, this relationship does not find any statistically significant variation.
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