Evaluating and Comparing of Monetary Policy Instrumental Rules for Economic of Iran

Document Type : Research Paper


1 Assistante Professor, University of Semnan, Semnan, Iran

2 Msc., University of Semnan, Semnan, Iran


Today, the discussion of regularity monetary policy in achieving inflation and output gap stabilization is important. In this paper, we investigated the persistence of the output gap in Iran economy and then by using a hybrid New Keynesian model based on quarterly data for 1990:1- 2011:3. We compared three alternative instrumental rules in monetary policy for Iran economy. The results indicated that in Iran economy: firstly, output gap is forward- looking and has little degree of persistence. Secondly, inflation targeting rule in comparison with the price level and speed limit targeting rule has the lowest social loss. In addition, the result of estimating coefficients under alternative rules showed that in comparison with other instrumental rules, inflation targeting and the first equation of price-level targeting, have well predicting power, especially in long-term forecasting horizons.