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Showing 1 results for Inflation Deviation

Kiomars Sohaili, Shahram Fattahi, Mahnaz Sorkhvandi,
Volume 6, Issue 21 (10-2015)
Abstract

Monetary policy is one of the most important macroeconomic policies which could be used for achieving economic targets such as reducing the output gap and reducing the inflation's deviation from it's target level.  These policies can be implemented through the control of volume of money or the rate of interest. Based on economic theories, the Central Bank should conduct monetary policies within a rule-based framework. In periods of positive or negative output gap or when inflation's deviation from it's target level is positive or negative, different monetary policies should be adopted. Assessment of Central Bank monetary policy's conformity to rules and the consistency of these policies with economic theories like Taylor's theory, is of vital importance. In order to evaluate the consistency of central bank monetary policies with economic theories, this study investigates the monetary strategies of Central Bank regarding the inflation's deviation and output gap during the period 1974-2013. It applies the Bootstrap method for this purpose. The result shows that Central Bank does not counteract the output gap during the periods of recession and boom and it's reactions to the inflation's deviation is in the reverse direction.



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