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Optimal Monetary Policy in Usury Free Banking System: The Case of Iran
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Mahdi Khandan Soveyri1   , Ahmad Asadzadeh *1 , Mohamadali Motafakker Azad2 , Jafar Haghighat2 |
1- Tabriz University
2- University of Tabriz |
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Abstract: (1305 Views) |
| The banking system in Iran operates based on the monetary and banking act approved in 1972 and the law for usury-free banking operations approved in 1983. Usury-free banking restrictions, in addition to contracts for the mobilization and allocation of resources within the Islamic framework, include a ban on the issuance of debt securities. However, the Taylor rule has been used with the issuance of government bonds since 2009 and permission for open market operations by the Central Bank. In this study, the monetary policy in Iran is investigated by Taylor rule firstly, then the optimal monetary policy (Ramsey method) with maximizing household utility as a target of the central bank is considered by using the nonlinear new Keynesian DSGE model. Necessary changes in various sectors of the model for a small oil-exporting economy within the framework of the usury-free banking system are considered, and its results are evaluated and described. The results show that in the case of deterministic steady-state (Taylor rule), the monetary shock has a greater impact and the petroleum technology impulse has the least impact on the gross domestic product, and if Ramsey's optimal monetary policy is pursued, the effects of shocks will be decreased, and economic stability will be improved. |
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Full-Text [PDF 2094 kb]
(588 Downloads)
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Type of Study: Empirical Study |
Subject:
Monetary Policy, Central Banking, and the Supply of Money and Credit (E5)
Received: 2021/01/12 | Accepted: 2021/05/17 | Published: 2021/09/28
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