The European Monetary Institute have narrowed down the choice of candidate strategies for a single monetary policy within European Monetary Union to inflation targets or monetary aggregate targets. In practice it is unlikely to be a simple choice between these targets, since all monetary authorities that currently pursue either of these strategies also monitor a wide set of economic and financi...

Abstract Given the high fluctuations of general price level, importance investment, and accessing sufficient financial resources, we examine effects monetary policy on nominal (Inflation) real (Investment) sectors a developing economy, like Iran, through channel relationship between bank deposits, stock market, speculation in foreign exchange market (FEM). For this purpose, due to regime switch...

The purpose of this paper is to estimate the welfare cost of inflation in Iran. We first use the long-horizon regression approach developed by Fisher and Seater (1993) to obtain an estimate of the inflation rate elasticity of money demand and then the Baily’s consumer surplus approach to calculate the welfare cost function. The results show that reducing inflation rate from 40% to 0% increases ...

In a passive monetary and active fiscal policy regime, changes in the value of public debt generate wealth effects on households. Then, in contrast to the active monetary and passive fiscal policy regime, inflation moves oppositely from the inflation target and a stronger reaction of interest rates to inflation increases the response of inflation to shocks. Moreover, a higher level of public de...

In many economies, commodity price volatility is one of the sources of signaling to market players. Different experiences of price shocks have led economists to reconsider price shocks. Considering the effects of monetary policy on the inflation rate, the present study investigates the impact of monetary policy shock on the price of storable food commodities. In this regard, data for 2006: 01 t...

We use a Bayesian Markov Chain Monte Carlo algorithm jointly to estimate the parameters of a ‘true’ data generating mechanism and those of a sequence of approximating models that a monetary authority uses to guide its decisions. Gaps between a true expectational Phillips curve and the monetary authority’s approximating non-expectational Phillips curve models unleash inflation that a monetary au...