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Exchange Rate Volatility, Financial Imbalances and Optimal Monetary Policy (in Persian)

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  • Sedqi, Hussain

    (Iran)

Abstract

The objective of this study is designing an optimal monetary policy rule in order to react to firms’ debt accumulation and stabilizing the economy. To address this¡ a DSGE model is designed where the effects of exchange rate oscillation¡ firms’ debt¡ and financial instability on the economy are investigated. The derived optimal monetary policy rule from this model shows that when the level of accumulated debt is high¡ the nominal interest rate (or the policy rule) should be increased. This can lead to financial stability through controlling over outstanding accumulated debt. JEL Classification: E52, G01

Suggested Citation

  • Sedqi, Hussain, 2011. "Exchange Rate Volatility, Financial Imbalances and Optimal Monetary Policy (in Persian)," Journal of Monetary and Banking Research (فصلنامه پژوهش‌های پولی-بانکی), Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 4(9), pages 179-204, December.
    • Handle: RePEc:mbr:jmbres:v:4:y:2011:i:9:p:179-204
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    More about this item

    Keywords

    DSGE; Exchange Rate; Firm's Debt; Financial Instability;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G01 - Financial Economics - - General - - - Financial Crises

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