The evaluation of different exchange rate regimes in a small open Economy (in Persian)

Shirin Salavitabar () and Ahmadreza Jalali-Naini ()
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Shirin Salavitabar: Iran
Ahmadreza Jalali-Naini: Iran

The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی و بودجه), 2014, vol. 19, issue 2, 3-24

Abstract: This research is an attempt to study about the efficiency of different exchange-rate regimes based on reduces in loss function of central bank in a form of Dynamic Stochastic General Equilibrium (DSGE), considering an oil exporting economy such as Iran's Economy. Thus, after adjusting a pattern, considering the structural characteristic of Iran’s Economy as oil exporting country and obtaining monetary rules under different exchange-rate regimes, the loss function of central bank will be compared. Central bank’s decision is based on interaction between interest and exchange rate. As a result, the research shows that, the optimal monetary rule under managed exchange-rate regime performs better than others. So, the decision making is based on the feedback of two political rules, one of them is for nominal interest rates and the other one is for changing in nominal value of exchange rate by central banks in small open Economics that can perform better than inflation targeting or fixed exchange rate models. The proposed model shows that how central bank can make a better political decision (low loss) by administrating two goals policies (interest and exchange rate).

Keywords: Monetary rule; Dynamic Stochastic General Equilibrium; Exchange regime; interest rate; exchange rate. (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:auv:jipbud:v:19:y:2014:i:2:p:3-24

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