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Reassessing The Effect Of Fiscal And Monetary Policies In Iran: The St. Louis Equation Revisited

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  • VAFA MOAYEDI

    (Sharif University of Technology, Iran)

Abstract

The purpose of this study is to observe the effect of fiscal and monetary policy actions on the Iranian economy. The famous St. Louis equation, an econometric model with lagged independent variables, is the key model for this study. Interestingly, the findings are converse to what scholars found when examining Western countries, especially the United States. With regard to Iran¡¯s case, monetary policy is much less effective than fiscal policy in stimulating permanent economic growth. It is suggested that government interference is the reason. Furthermore, these findings support the equation¡¯s general validity and its application, due to its parsimonious construction.

Suggested Citation

  • Vafa Moayedi, 2013. "Reassessing The Effect Of Fiscal And Monetary Policies In Iran: The St. Louis Equation Revisited," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(4), pages 123-141, December.
    • Handle: RePEc:jed:journl:v:38:y:2013:i:4:p:123-141
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    References listed on IDEAS

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    1. Stephen M. Goldfeld & Alan S. Blinder, 1972. "Some Implications of Endogenous Stabilization Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 3(3), pages 585-644.
    2. Keith M. Carlson, 1978. "Does the St. Louis equation now believe in fiscal policy?," Review, Federal Reserve Bank of St. Louis, vol. 60(Feb), pages 13-19.
    3. Mazarei, Adnan, Jr, 1996. "The Iranian Economy under the Islamic Republic: Institutional Change and Macroeconomic Performance (1979-1990)," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 20(3), pages 289-314, May.
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    5. Ahmed, Ehsan & Johannes, James M, 1984. "St. Louis Equation Restrictions and Criticisms Revisited: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 514-520, November.
    6. Jerry L. Jordan, 1986. "The Andersen-Jordan approach after nearly 20 years," Review, Federal Reserve Bank of St. Louis, issue Oct, pages 5-8.
    7. Koot, Ronald S, 1977. "On the St. Louis Equation and an Alternative Definition of the Money Supply," Journal of Finance, American Finance Association, vol. 32(3), pages 917-920, June.
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    12. Bonato Leo, 2008. "Money and Inflation in the Islamic Republic of Iran," Review of Middle East Economics and Finance, De Gruyter, vol. 4(1), pages 41-58, January.
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    Cited by:

    1. Ghanashyama Mahanty & Dwijendra Nath Dwivedi & Badri Narayanan Gopalakrishnan, 2023. "The Efficacy of Fiscal Vs Monetary Policies in the Asia-Pacific Region: The St. Louis Equation Revisited," Vision, , vol. 27(2), pages 256-263, April.
    2. Abu Bakarr Tarawalie & Noah Kargbo, 2020. "Efficacy of Fiscal and Monetary Policy in Sierra Leone: An ARDL Bound Testing Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 10(3), pages 217-224.
    3. Michael Adebayo Ajayi & Olufemi Adewale Aluko, 2017. "Evaluating the Relative Impact of Monetary and Fiscal Policy in Nigeria using the St. Louis Equation," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(1), pages 40-50, February.

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    More about this item

    Keywords

    Fiscal Policy; Iran; Monetary Policy; St. Louis Equation; TRAMO/SEATS;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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