The Effect of Corruption and Central Bank Independence on Volume of Money in Iran: Using the Model (STAR)

Abstract

The present study has investigated the effect of corruption on monetary policy with respect to different levels of central bank independence during the period 1978-2017 using the STAR model. The results of the model estimation, in addition to confirming the nonlinear in the relationship between Central Bank of Iran Independence Index and the growth of money volume, show that increasing the degree of central bank independence in both regimes has reduced the growth of money volume. In addition, in the regime of low central bank independence, an increase in the corruption index has led to an increase in the volume of money. However, in a regime where the central bank is more independent, the index of corruption has no effect on money growth.

Keywords

• central bank independence (cbi)
• principal component analysis (pca)
• smooth transition autoregressive (star)
• monetary policy
• corruption