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Financial Inclusion and Monetary Policy in Iran (in Persian)

Author

Listed:
  • Fardhariri, Alireza

    (Faculty of Economics, University of Tehran, Iran.)

  • Taiebnia, Ali

    (Faculty of Economics, University of Tehran, Iran.)

  • Tavakolian, Hossein

    (Faculty of Economics, Allameh Tabataba'i University, Iran.)

Abstract

The present study investigated the effectiveness of monetary policy and its consequences for financially included and excluded households using a calibrated new Keynesian dynamic stochastic general equilibrium (DSGE) for Iran. The impulse response function analysis suggests that although a significant part of the population is financially excluded (about 45%), the contractionary monetary policy shock significantly reduces inflation and GDP. In addition, a contractionary monetary policy decreases the consumption of financially excluded households more than that of financially included households, because financially included households can absorb this shock due to access to financial instruments (services) and can, therefore, smooth their consumption more effectively than financially excluded households. The comparison of the results obtained from our model with the full financial inclusion model suggests that expansionary monetary policy in full financial inclusion leads to higher output growth with lower inflation costs. Therefore, efforts to ensure full financial inclusion are recommended so that monetary policy can fully achieve its goals.

Suggested Citation

  • Fardhariri, Alireza & Taiebnia, Ali & Tavakolian, Hossein, 2022. "Financial Inclusion and Monetary Policy in Iran (in Persian)," The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی Ùˆ بودجه), Institute for Management and Planning studies, vol. 27(2), pages 51-88, September.
    • Handle: RePEc:auv:jipbud:v:27:y:2022:i:2:p:51-88
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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