A Micro-found Model of Monetary Policy Making in Iran

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Lashkaripour, Ahmad | 2009

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 39599 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Nili, Farhad
Abstract:
This thesis analyzes the behavior of inflation in the Iranian economy by introducing a micro-founded model of monetary policy. The model predicts a direct relationship between inflation and oil export revenues in the oil dependent economy of Iran. This theory driven claim is verified empirically, and test results tend to confirm a meaningful relationship between inflation and Oil export data in Iran. Based on results attained from the micro-founded model, an augmented SVAR model is proposed for estimating underlying inflation in the Iranian economy. The proposed model is found to render better results than the conventional models used for estimating underlying inflation. Moreover it is demonstrated that price enforcement policies conducted by the government in Iran, have an adverse effect both on the level of inflation and on its persistence. This study also examines the impact of stabilizing oil income revenues on inflation in Iran, and concludes that less volatile oil export revenues can result in lower average inflation with lower variance over time.
Keywords:
Oil Income ; Government Expenditures ; Monetary Policy ; Inflation in Iran ; Underlying Inflation ; Inflation Persistence ; Structural Shocks ; Structural Vector Autoregressive (SVAR)Model

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