An Optimal Rule for Monetary Policy with Inflation Persistence: The Case of Iran
The main goal of this paper is to derive an optimal rule for monetary policy in Iran. To do so, we estimate the monetary transmission equations and derive the optimal rule by using the dynamic programming method. Our dynamic optimization problem is to minimize the central bank's loss function s...
| Main Authors: | , , |
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| Format: | Article |
| Language: | fas |
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Allameh Tabataba'i University Press
2012-06-01
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| Series: | فصلنامه پژوهشهای اقتصادی ایران |
| Subjects: | |
| Online Access: | https://ijer.atu.ac.ir/article_2828_84b7bac7111422663adc44299485b633.pdf |
| _version_ | 1797369422165311488 |
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| author | Morteza Khorsandi Karim Eslamloueyan Hossein Zonnoor |
| author_facet | Morteza Khorsandi Karim Eslamloueyan Hossein Zonnoor |
| author_sort | Morteza Khorsandi |
| collection | DOAJ |
| description | The main goal of this paper is to derive an optimal rule for monetary policy in Iran. To do so, we estimate the monetary transmission equations and derive the optimal rule by using the dynamic programming method. Our dynamic optimization problem is to minimize the central bank's loss function subject to the transmission mechanism equations. We have modified our loss function to include inflation persistence as well. Using the growth rate in broad definition of money, M2 as our control variable, we estimate the transmission mechanism equations and derive the optimal monetary rule. Our findings indicate that the optimal monetary policy rule can decrease welfare losses and hence is a welfare improving policy. This means that the use of monetary rule is superior to discretionary policy in the case of Iran. |
| first_indexed | 2024-03-08T17:46:38Z |
| format | Article |
| id | doaj.art-f899bf5913484cb5a5df87b1749264ca |
| institution | Directory Open Access Journal |
| issn | 1726-0728 2476-6445 |
| language | fas |
| last_indexed | 2024-03-08T17:46:38Z |
| publishDate | 2012-06-01 |
| publisher | Allameh Tabataba'i University Press |
| record_format | Article |
| series | فصلنامه پژوهشهای اقتصادی ایران |
| spelling | doaj.art-f899bf5913484cb5a5df87b1749264ca2024-01-02T10:28:58ZfasAllameh Tabataba'i University Pressفصلنامه پژوهشهای اقتصادی ایران1726-07282476-64452012-06-01175143702828An Optimal Rule for Monetary Policy with Inflation Persistence: The Case of IranMorteza Khorsandi0Karim Eslamloueyan1Hossein Zonnoor2Ph.D in Economics, Faculty of Economics, Allameh Tabatabaie UniversityAssociate Professor in Economic, Shiraz University UniversityAssociate Professor in Economic, Shiraz University UniversityThe main goal of this paper is to derive an optimal rule for monetary policy in Iran. To do so, we estimate the monetary transmission equations and derive the optimal rule by using the dynamic programming method. Our dynamic optimization problem is to minimize the central bank's loss function subject to the transmission mechanism equations. We have modified our loss function to include inflation persistence as well. Using the growth rate in broad definition of money, M2 as our control variable, we estimate the transmission mechanism equations and derive the optimal monetary rule. Our findings indicate that the optimal monetary policy rule can decrease welfare losses and hence is a welfare improving policy. This means that the use of monetary rule is superior to discretionary policy in the case of Iran.https://ijer.atu.ac.ir/article_2828_84b7bac7111422663adc44299485b633.pdfrule versus discretionoptimal monetary policy ruleinflation persistencedynamic programmingiran |
| spellingShingle | Morteza Khorsandi Karim Eslamloueyan Hossein Zonnoor An Optimal Rule for Monetary Policy with Inflation Persistence: The Case of Iran فصلنامه پژوهشهای اقتصادی ایران rule versus discretion optimal monetary policy rule inflation persistence dynamic programming iran |
| title | An Optimal Rule for Monetary Policy with Inflation Persistence: The Case of Iran |
| title_full | An Optimal Rule for Monetary Policy with Inflation Persistence: The Case of Iran |
| title_fullStr | An Optimal Rule for Monetary Policy with Inflation Persistence: The Case of Iran |
| title_full_unstemmed | An Optimal Rule for Monetary Policy with Inflation Persistence: The Case of Iran |
| title_short | An Optimal Rule for Monetary Policy with Inflation Persistence: The Case of Iran |
| title_sort | optimal rule for monetary policy with inflation persistence the case of iran |
| topic | rule versus discretion optimal monetary policy rule inflation persistence dynamic programming iran |
| url | https://ijer.atu.ac.ir/article_2828_84b7bac7111422663adc44299485b633.pdf |
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