Evaluating the Effects of Real Interest Rate and Reserve Requirements on the Selected Macro Variables of the Iranian Economy

Shahnaz Haji Ghasemi (), Mehdi Nejati () and Nuraallah Salehi Asfeji ()
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Shahnaz Haji Ghasemi: M.A. Student in Economics, Shahid Bahonar University
Mehdi Nejati: Assistant Professor of Economics, Shahid Bahonar University
Nuraallah Salehi Asfeji: Assistant Professor of Economics, Shahid Bahonar University

Quarterly Journal of Applied Theories of Economics, 2017, vol. 4, issue 3, 117-142

Abstract: The association between monetary policy and real economic variables has always been among the economist's major topics of discussion. Depending on the economic situation of Iran, Monetary authorities draw on monetary policy so that they are affected by real economic variables. As a means of monetary policy, interest rate and reserve requirements affect macroeconomic variables significantly. Considering the fact that unemployment, inflation and the lack of sustainable and desirable economic growth have been among the major economic problems of Iran over the past few years, this study uses the simultaneous equation system and adopts generalized method of moments (GMM), in order to analyze the effects of the selected macroeconomic variables of Iran (e.g. inflation, unemployment and economic growth) during the period 1983-2015. The results suggested that the increase in real interest rate is followed by lower GDP, inflation and unemployment, while the increase in reserve requirements results in lower inflation, but higher GDP.

Keywords: Real interest rate; Reserve requirement rate; Macroeconomic variables (search for similar items in EconPapers)
JEL-codes: E43 E51 E58 (search for similar items in EconPapers)
Date: 2017
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