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:: Volume 6, Issue 24 (quarterly journal of fiscal and economic policies 2019) ::
2019, 6(24): 7-31 Back to browse issues page
Rule-based of Monetary Policy in Iran Inspired by McCallum Rule
Naser Elahi, Seyed Ziyaodin Kiaalhoseini, Masoud Salehi rezveh
Mofid University
Abstract:   (308 Views)

Economists have reached a consensus that an independent central bank could improve its policy efficiency by following a monetary policy rule. One of the important rules is McCallum rule where that requires central banks to target the growth rate of nominal GDP using the monetary base as its instrument. One of the features of the McCallum rule uses the monetary base rather than the interest rates as the monetary policy instrument that is consistent with the Interest-free banking system in Iran. This paper utilizes a counterfactual simulation method to evaluate the feasibility of McCallum rule as a policy guideline for Iran in two simple macroeconomic models. The simulation results show that following the McCallum rule could significantly reduce Iran’s nominal GDP fluctuations. The analysis shows that rule-specified path for the monetary base changes could be used as a benchmark for the Central Bank of Iran policy decision.
 

Keywords: McCallum rule, Policy rule, Counterfactual simulation method
Full-Text [PDF 982 kb]   (119 Downloads)    
Type of Study: Applicable | Subject: Special
Received: 2016/01/20 | Accepted: 2018/10/15
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Elahi N, Kiaalhoseini S Z, salehi rezveh M. Rule-based of Monetary Policy in Iran Inspired by McCallum Rule. quarterly journal of fiscal and Economic policies. 2019; 6 (24) :7-31
URL: http://qjfep.ir/article-1-429-en.html


Volume 6, Issue 24 (quarterly journal of fiscal and economic policies 2019) Back to browse issues page
فصلنامه سیاستهای مالی و اقتصادی Quarterly Journal of Fiscal and Economic Policies
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