Investigating The Gap Between Optimum and Actual Growth Rate Quantity of Money in Iran Economy

Abstract

The growth rate of money in the economic literature is a key issue, the optimal rate of which is determined in an economy with certain parameters of the time preference rate, the real interest rate, and consumption smoothing rate. The main purpose of this study is to calculate the growth rate of money and compare it with the optimal growth rate of money in the Iranian economy. Also, in the case of non-observance of the optimal rule of money, the effective components of the difference between optimum and actual growth rate quantity of money investigated. In this paper, the monetary gap of Iran's economy is obtained using Sidarsky's utility function model in the period 1959 to 2020 using the calibration approach in three different scenarios. Then, to investigate the effective factors on the Iranian economic gap, the ordinary least squares method was used during the period 1973-2020. The results of the calibration method show that, in every three scenarios, liquidity gaps are more than monetary gaps, and monetary gaps almost have the same process. The results obtained from ordinary least squares method show that the growth rate of real monetary base components per capita in terms of resources including net government debt to the central bank; net foreign reserves of the central bank and net debt of banks to the central bank, have increased the gaps in three scenarios.

Keywords

• " monetary base components"
• "sidarsky's utility function"
• "the gap between optimum and actual growth rate quantity of money"
• "time preference rate"
• "real interest rate"