Volume 4, Issue 12 (7-2013)                   jemr 2013, 4(12): 1-27 | Back to browse issues page

XML Persian Abstract Print

Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:

erfani A, talebbeydokhti A. Optimal Monetary Policy Speed Limits in Iran Economy. jemr 2013; 4 (12) :1-27
URL: http://jemr.khu.ac.ir/article-1-556-en.html
1- semnan university , erfani88@gmail.com
2- semnan university
Abstract:   (8888 Views)
The commitment and forward-looking behavior of central bank is of great importance. Commitment imposes less social costs on the central bank and the public. However, while there is wide agreement on the importance of commitment, there is much less consensus on how to implement commitment through targeting or instrumental rules. In this paper, we have estimated a basic New Keynesian model in Iran economy based on quarterly data over a sample period for 1990-2010. Then, we introduced a kind of instrumental rules that is called Speed Limit rule. The main feature of this rule is that the output gap is replaced by the changes in the output gap in the central bank's loss function. Then, by calculating appropriate weights under alternative targeting rules, we showed that this rule has the lowest social costs. Then, assuming the use of interest rate as primary monetary policy by the central bank, it is optimal to consider the role of the changes in the output gap (i.e. speed limit rule) in addition to the role of inflation and the output gap. As we expected, the estimation results of this instrumental rule in Iran economy showed that this rule has not been used for determining the interest rate. In other words, among the variables considered, only inflation rate has a positive and significant relationship with the interest rate, and the output gap and the changes in the output gap are not used in determining the interest rate.
Full-Text [PDF 985 kb]   (1662 Downloads)    
Type of Study: Applicable | Subject: پولی و مالی
Received: 2012/10/5 | Accepted: 2013/10/12 | Published: 2013/10/12

Add your comments about this article : Your username or Email:

Send email to the article author

Rights and permissions
Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

© 2023 CC BY-NC 4.0 | Journal of Economic Modeling Research

Designed & Developed by : Yektaweb