Economic Research and Perspectives

Economic Research and Perspectives

Evaluation of the Stabilization Performance of the Mixed Monetary and Macro-Prudential Policy in the Economy of Iran

Authors
alireza erfani 1
Hossein Tavakolian 2
azadeh talebbeydokhti 3
1 Associate Professor of Economics, Department of Economics, Semnan University, Semnan, Iran
2 Assistant professor of Economics, Faculty of Economics, Allameh Tabataba'i University, Tehran, Iran
3 PhD student in Monetary Economics, Semnan University, Semnan, Iran
Abstract
Today, achieving financial stability alongside stabilizing inflation and output is of particular importance among monetary policymakers and regulatory authorities. In this study, a Dynamic Stochastic General Equilibrium Model was used for the period 1990: 1 to 2014: 4 in the economy of Iran, in which a measure of financial shock was also introduced. In this model, the financial shock is modeled as a reduction in external financing premium of the firm. Comparison of the performance of policy rules showed that following an expansionary financial shock, macro-prudential policy regime, in which instruments of monetary policy and macro-prudential policy deal with excessive growth of credit, leads to a significant reduction in the external financing premium of the firm. This in turn leads to less volatility in economic variables, such as inflation and output. This would improve the welfare in the Economy of Iran.
Keywords
Monetary policy
Macro-Prudential Policy
Financing Premium
Iran

Subjects

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Economic Research and Perspectives
Volume 18, Issue 4
Winter 2019
Pages 133-160