The Impact of Monetary Policy on Economic Growth in Iran

Abstract

2 Abstract: Evolution of money supply and gross domestic product are in a close relationship. This study examine the relationship between money supply and economic growth in Iran adopting ordinary least squares (OLS) technique and also uses data obtained from the central bank of Iran during 1974 to 2008. To do so, using Levine and Renelt growth model we found that there is a positive and significance relationship between money supply and economic growth in Iran. (quantity of money) in circulation may be represented by The implication of the stability of the relationship any monetary aggregate such as M0, M1 or M2; V, between money and economic growth will show the velocity of money; P, price level that usually measured by effectiveness of monetary policy following the GDP deflator or CPI (consumer price index); Y, real value conventional Hicksian IS-LM analysis (11). The purpose of aggregate output (GDP). This identity usually known of this article is to investigate the impact of money as the equation of exchange has generated several supply on economic growth. The paper organized as debates among economists. First, it has been debated that follows. In continue and in second section, theoretical MV causes PY or PY causes MV. Second, whether foundation and experimental evidences as review of velocity (V) and output (Y) are fixed (constant) or not. literature are described. Third section of study attributed Third, whether money supply (M) is fixed by the central to introducing methodology. In fourth section, Research bank or not? In the classical model of economic findings are presented and the final section is devoted output is determined by level of capital and labor.

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