Effect of Credit Easing Policy on Recovery of Iran’s Economy: Stochastic Dynamic General Equilibrium Model Approach

Document Type : Research Article

Authors

1 PhD student in Economics, Faculty of Economics and Management, University of Sistan and Baluchistan, Zahedan, Iran

2 Associate Professor, Department of Economics, Faculty of Economics and Management, University of Sistan and Baluchistan, Zahedan, Iran

3 Professor of Economics, Faculty of Economics, Institute of Humanities and Cultural Studies, Tehran, Iran

Abstract

By utilizing the new Keynesian stochastic dynamic general equilibrium model, this paper examines the effects of credit easing policy on macroeconomic variables with or emphasizing on production. For this purpose, a model has been design including 5 sectors of household, enterprises, banks, government and central bank. Considering the dominance of fiscal policy over monetary policy in the Iranian economy, the integrated constraint of the government and the central bank has been used. The model has been estimated using Bayesian method and quarterly time series data during 1991 to 2017. The results of Impulse Response Function show that implementation of this policy has increased consumption, investment, government spending and ultimately production, which indicates the effectiveness of this unconventional monetary policy to get the economy out of recession. Also, in response to the positive impulse of the central bank’s credit line to banks and the negative impulse of legal reserves, bank facilities increase, which is in line with theoretical expectations. The impact of the negative impulse of interbank market rate has also led to an increase in production credits. 

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References

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Journal of Applied Economics Studies in Iran
Volume 11, Issue 44
English
March 2023
Pages 9-37

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