Inflation constitutes a significant economic challenge for both citizens and policymakers. A crucial step towards mitigating inflationary pressures and enhancing purchasing power lies in identifying the underlying causes and mechanisms. This study investigates the impact of various factors on inflation dynamics in the Iranian economy, including adaptive and rational expectations, liquidity growth, demand shocks, exchange rate shocks, and government budget deficits. By examining these factors within the framework of established inflation theories, the study aims to inform more effective inflation control and management policies. Employing the Generalized Method of Moments (GMM) and utilizing time series data spanning 1973-2022, the study finds that exchange rate shocks, liquidity growth, and government budget deficits exert the most significant influence on inflation rates in the Iranian economy. Based on these findings, policy recommendations include: reforming foreign exchange policies, adjusting the exchange rate system, controlling liquidity growth, restructuring government finances, and implementing appropriate contractionary monetary and fiscal policies.