Investigating and Comparing the Role of Goals and Rules on the Welfare Measure of the Central Bank in Iran Economy

Document Type : Research Paper

Authors

1 Associate Professor of Semnan University, Faculty of Economics

2 PhD student in monetary Economics at University of Semnan

Abstract

In this paper, by using a model of the new Keynesians, we investigated the role of the central bank's accountability to shocks that causes deviations in the performance of the monetary policymakers. For this purpose, we used quarterly data for 69: 1 to 93: 3, and estimated the basic equations of the new Keynesians model. Then, By calculating the optimal values for the central bank's accountability to the two potential sources of deviations from the goals of economic stability and deviation of commitment to rules, we compared the loss of central bank to the loss of social. The results showed that the degree of central bank's accountability to commitment an instrumental rule is less than the degree of the accountability to achieve the goals of economic stability. Also, the central bank with applying Reforms in the implementation of its policy by optimal response to both types of deviations can be close to the results of the welfare society.
Then, in order to compare the importance of accountability of the central bank to achieve both goals, we considered two cases. The results showed that in the period of study in Iranian economy, the main objective of monetary policymaking has been more focused on stability of the economic goals but, the importance of commitment to follow an announced rule and accountability to that rule is too low, so that, it had no impact on the welfare function of the central bank.
JEL Classification: E52, E58 
 

Keywords

References

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Journal of Economic Research (Tahghighat- E- Eghtesadi)
Volume 51, Issue 1
March 2016
Pages 175-203

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History

  • Receive Date: 22 April 2015
  • Revise Date: 06 October 2015
  • Accept Date: 14 February 2016

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