:: Volume 5, Issue 2 (Spring 2009) ::
J. Mon. Ec. 2009, 5(2): 129-148 Back to browse issues page
Monetary Policy in Iran: The Challenge of Reducing Inflation
Leo Bonato *, Abdelali Jbili1
1- International Monetary Fund
Abstract:   (3044 Views)

The conduct of monetary policy in an oil economy with a managed floating exchange rate regime can be challenging in an environment of fiscal dominance and incomplete transition to a market economy. The Five-Year Development Plans provide a natural benchmark against which to assess monetary policy performance in Iran. Price stability has proved elusive, with liquidity growth targets constantly exceeded by a large margin. The paper examines the reasons behind these results and, based on the lessons that can be drawn from the literature and the international experience, makes some proposals on how to improve on this record. Although fiscal dominance remains the main obstacle to disinflation, reforms to strengthen the anti-inflationary mandate and the operational independence of the central bank, and more effective monetary instruments are also needed.

JEL Classification: E31,E51

Keywords: Iran, monetary policy, inflation, exchange rate
Full-Text [PDF 276 kb]   (967 Downloads)    
Type of Study: Research | Subject: Monetary Economics
Received: 2014/04/21 | Accepted: 2014/04/21 | Published: 2014/04/21

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Volume 5, Issue 2 (Spring 2009) Back to browse issues page