Investigating the Optimal Behavior of Policymakers in Determining Bank Interest Rates in the Iranian Economy
Moahmad Reza Hosainahmadi () and
Alireza Erfani ()
Additional contact information
Moahmad Reza Hosainahmadi: M.A. student of Economic in Semnan University
Alireza Erfani: Associate Professor of Economic department in Semnan University
Quarterly Journal of Applied Theories of Economics, 2021, vol. 7, issue 4, 1-26
In monetary theories, the interest rate is the link between financial conditions and the rate of physical capital accumulation. In Iran, this rate is determined normatively. The question is - has this method of determining interest rates worked properly or not? The purpose is to investigate the optimality of policymaker behavior in determining bank interest rates by explaining a multi-objective linear optimization model. For this purpose, first the components of the model including target functions (income and money supply) and constraints (private consumption, government spending and inflation) are estimated by ARDL model, based on data from 1358-1397. Then the optimization model for all years of the period 1396-1387 has been solved using parametric technique. Comparing the values obtained from solving the model with the real values resulting from the policies shows: 1- The bank interest rate set by the policy maker during the period is not optimal and in achieving the maximum policy goals within the capacity 2. In an optimal structure, there is a positive relationship between real bank interest rates greater than zero and income, but this has a limit value. Therefore, the results of McKinnon and Shaw's research on the effect of bank profits greater than zero on economic growth in the optimal structure of the economy in Iran are confirmed. 3. Under optimal conditions, the implementation of contractionary monetary policy to reduce inflation with a low threshold If the money supply falls below this level, it will have the opposite effect
Keywords: ARDL; facility interest rate; multi-objective planning; optimization; weighted average (search for similar items in EconPapers)
JEL-codes: C51 C61 E49 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://ecoj.tabrizu.ac.ir/article_12261_2691e0592a5811716a158cfef548dca8.pdf Full text (text/html)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ris:qjatoe:0206
Access Statistics for this article
Quarterly Journal of Applied Theories of Economics is currently edited by Sakineh Sojoodi
More articles in Quarterly Journal of Applied Theories of Economics from Faculty of Economics, Management and Business, University of Tabriz Contact information at EDIRC.
Bibliographic data for series maintained by Sakineh Sojoodi ().