IDEAS home Printed from https://ideas.repec.org/a/eut/journl/v20y2016i4p479.html
   My bibliography  Save this article

Investigating the Role of Monetary and Fiscal Policy Tools on Economic Growth Using Dynamic Simulation and Fuzzy Control Approach

Author

Listed:
  • Sahar Motamedi

    (Department of Economics, Shahid Chamran University, Ahvaz, Iran.)

  • Mansour Zarra-Nezhad

    (Department of Economics, Shahid Chamran University, Ahvaz, Iran.)

Abstract

In this study, a macro-economic model consisting of twelve behavioral equations and fourteen identity equations was estimated with the aim of investigating the effectiveness of monetary and fiscal policies set out in the fourth and fifth development plans. In the estimated model, the variables of development expenditures, current expenditures and tax revenues are used as fiscal policy tools and variables of liquidity and long-term interest rates of bank were used as monetary policy tools. The results of solving the model using a dynamic simulation showed that by the implementation of this scenario, one can achieve a steady growth rate for model’s endogenous variables during the period and reduce its deviation from target values. Then, a fuzzy control system was designed with the aim of minimizing deviations and changes in the deviation of non-oil GDP from the values determined in the fourth and fifth development plans. Liquidity variables and government development expenditures were used as control tools in this system. Results obtained from the fuzzy system showed that using control rules, the growth rate of liquidity can be put at a lower level and growth rate of development expenditure around quantified targeted values in the fourth and fifth development plans. Also, the oscillation amplitude of the inflation and growth rates of non-oil production can also be reduced.

Suggested Citation

  • Sahar Motamedi & Mansour Zarra-Nezhad, 2016. "Investigating the Role of Monetary and Fiscal Policy Tools on Economic Growth Using Dynamic Simulation and Fuzzy Control Approach," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 20(4), pages 479-500, Autumn.
    • Handle: RePEc:eut:journl:v:20:y:2016:i:4:p:479
    as

    Download full text from publisher

    File URL: ftp://80.66.179.253/eut/journl/20164-3.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. William D. Nordhaus, 1994. "Policy games: Coordination and Independece in Monetary and Fiscal Policies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 139-216.
    2. Richard N. Cooper, 1969. "Macroeconomic Policy Adjustment in Interdependent Economies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 83(1), pages 1-24.
    3. International Monetary Fund, 1998. "Coordination of Monetary and Fiscal Policies," IMF Working Papers 1998/025, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mansour Zarra-Nezhad & Sahar Motamedi & Amir Hossein Montazer Hojat & Ebrahim Anvari, 2015. "An Investigation into the Efficiency of Monetary and Fiscal Policies in Iran Case Study: The 4th Economic Development Plan," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(5), pages 734-746, May.
    2. Bhattarai, Keshab & Mallick, Sushanta K. & Yang, Bo, 2021. "Are global spillovers complementary or competitive? Need for international policy coordination," Journal of International Money and Finance, Elsevier, vol. 110(C).
    3. Pablo Mendieta Ossio & Hugo Rodriguez Gonzales, 2005. "Interacción de la política fiscal con la política monetaria en el MERCOSUR y países asociados," Revista de Análisis del BCB, Banco Central de Bolivia, vol. 8(1), pages 49-97, December.
    4. Herman Bennett & Norman Loayza, 2002. "Policy Biases when the Monetary and Fiscal Authorities Have Different Objectives," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.),Monetary Policy: Rules and Transmission Mechanisms, edition 1, volume 4, chapter 11, pages 299-330, Central Bank of Chile.
    5. repec:spo:wpmain:info:hdl:2441/5262 is not listed on IDEAS
    6. Herzog, Bodo, 2006. "Coordination of fiscal and monetary policy in CIS-countries: A theory of optimum fiscal area?," Research in International Business and Finance, Elsevier, vol. 20(2), pages 256-274, June.
    7. Valery Lopatin A. & В. Лопатин А., 2017. "Структура механизма координации бюджетно-налоговой и денежно-кредитной политики // The Structure of the Coordination Mechanism of the Fiscal and Monetary Policy," Экономика. Налоги. Право // Economics, taxes & law, ФГОБУ "Финансовый университет при Правительстве Российской Федерации" // Financial University under The Government of Russian Federation, vol. 10(3), pages 6-12.
    8. Pusch, Toralf, 2008. "EZB contra Gewerkschaften? Mit Reputationsaufbau zur Vollbeschäftigung in Europa," Working Papers on Economic Governance 29, University of Hamburg, Department of Socioeconomics.
    9. Carsten Hefeker & Michael Neugart, 2019. "Policy Coordination Under Model Disagreement and Uncertainty," Open Economies Review, Springer, vol. 30(4), pages 719-737, September.
    10. Irina A. Loukianova & Maria A. Shkliarova & Stanislav Yu. Vysotsky, 2019. "Modelling of Fiscal and Monetary Policy Interactions in the Republic of Belarus," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 5(3), pages 220-235.
    11. Fujiwara, Ippei & Kam, Timothy & Sunakawa, Takeki, 2019. "Sustainable international monetary policy cooperation," Journal of Economic Dynamics and Control, Elsevier, vol. 106(C), pages 1-1.
    12. Sung Y. Kwack, 1974. "Price linkage in an interdependent world economy: price responses to exchange rate and activity changes," International Finance Discussion Papers 56, Board of Governors of the Federal Reserve System (U.S.).
    13. Witold Jakóbik, 2006. "Dylematy koordynacji polityki pieniężnej i fiskalnej," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1-2, pages 1-17.
    14. Andrew Brociner, 1993. "L'Union monétaire européenne : une revue de la littérature théorique," Revue de l'OFCE, Programme National Persée, vol. 43(1), pages 349-363.
    15. Keshab Bhattarai & Sushanta K. Mallick, 2015. "Macroeconomic policy coordination in the global economy: VAR and BVAR-DSGE analyses," Working Paper series 15-01, Rimini Centre for Economic Analysis.
    16. Norman Loayza & Herman Bennett, 2004. "Policy Biases under Lack of Coordination," Econometric Society 2004 Latin American Meetings 349, Econometric Society.
    17. Willem H. Buiter & Jonathan Eaton, 1980. "Policy Decentralization and Exchange Rate Management in Interdependent Economies," NBER Working Papers 0531, National Bureau of Economic Research, Inc.
    18. Dumitriu, Ramona & Stefanescu, Razvan, 2013. "Provocările politicii monetare [Monetary policy challenges]," MPRA Paper 50261, University Library of Munich, Germany, revised 28 Sep 2013.
    19. Mihailov, Alexander & Ullrich, Katrin, 2007. "Independence and Accountability of Monetary and Fiscal Policy Committees," ZEW Discussion Papers 07-044, ZEW - Leibniz Centre for European Economic Research.
    20. De Bonis, Valeria & Della Posta, Pompeo, 2010. "On the Coordination of National Fiscal Policies in a Monetary Union - Il coordinamento delle politiche fiscali nazionali in un’unione monetaria," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 63(3), pages 273-296.
    21. Hossein Samiei & Mr. Jan Kees Martijn, 1999. "Central Bank Independence and the Conduct of Monetary Policy in the United Kingdom," IMF Working Papers 1999/170, International Monetary Fund.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eut:journl:v:20:y:2016:i:4:p:479. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: [z.rahimalipour] (email available below). General contact details of provider: https://edirc.repec.org/data/fecutir.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.