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Monetary Policy Rule in Iran with Emphasis on Exchange Rate and Monetary Base
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Jahandir Biabani1   , Kamran Nadri2 , Hamed Taheri *1 |
1- Payame Noor Univesity
2- Imam Sadiq Unuversity |
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Abstract: (1368 Views) |
| This study examines the monetary policy rule of the Central Bank of Iran regarding exchange rate policy and the monetary base. Since the rule of monetary policy is flexible to the economic conditions and the regime governing policy variables, the Markov regime transmission approach has been used to derive the rule of monetary policy in 2005:3-2018:3. The results show that the output gap in the low regimes of the exchange rate has a positive and significant effect and in the high regimes has a negative and significant effect, and the inflation gap in the high exchange rate regime has a positive and significant effect, and in the low exchange rate regime, the exchange rate does not have a significant effect. On the low regimes of the exchange rate, the government's budget deficit has a positive and significant effect and does not significantly affect the high regimes. The increase in the output gap in all monetary-based regimes has led to an increase in the monetary base in the country. The monetary regime and the inflation gap in the high levels of the monetary base have a negative and significant effect, and in the lower regimes, it has a positive and significant effect. Based on these results, it is recommended that the central bank pay attention to monetary and exchange rate behavioral regimes in implementing foreign exchange and monetary policies and adopt appropriate monetary and exchange rate policies in each regime, depending on the circumstances. |
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Full-Text [PDF 1648 kb]
(666 Downloads)
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Type of Study: Case Study |
Subject:
Monetary Policy, Central Banking, and the Supply of Money and Credit (E5)
Received: 2020/11/29 | Accepted: 2021/05/17 | Published: 2021/11/17
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