The Endogenous or Exogenous Nature of Money Supply: Case of Iran

Azadeh Rahimi ()
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Azadeh Rahimi : Monetary Expert at the Central Bank of Iran

Journal of Money and Economy, 2019, vol. 14, issue 1, 27-40

Abstract: This paper investigates the endogenous money supply hypothesis in Iran. To this end, we attempt to find causality directions between bank credits and money aggregates. Utilizing Diks and Panchenko’s (2006) nonparametric Granger causality test for the time series data over the period 2006:04-2018:12 confirms the existence of a significant causality running from bank credits to money aggregates. These results indicate that money supply in Iran is demand-determined, which is in line with Post-Keynesians’ money supply endogenous theory. In this case, following the interest rate targeting rather than the monetary aggregate targeting approach and therefore, applying open market operation is necessary.

Keywords: Endogenous Money Supply; Post Keynesian Hypothesis; Nonparametric Econometrics; Granger Causality Test (search for similar items in EconPapers)
JEL-codes: C14 C32 E52 E58 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:mbr:jmonec:v:14:y:2019:i:1:p:27-40

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