The system Dynamics Approach to Money Creation Effect on Inflation in Iran Economy

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BAKHSHI DASTJERDI RASUL; Taleb Baghebani Mohammadreza; Mojahedi Moakhar Mohamad Mahdi; Ahmadniya Mohammad Saleh

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Journal: Journal of Economic Research and Policies Year:2019 | Volume:27 | Issue:89 Page(s): 97-135

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Title

The system Dynamics Approach to Money Creation Effect on Inflation in Iran Economy

Author(s)

BAKHSHI DASTJERDI RASUL | Taleb Baghebani Mohammadreza | Mojahedi Moakhar Mohamad Mahdi | Ahmadniya Mohammad Saleh | Issue Writer Certificate

Keywords

Creation of MoneyQ2

InflationQ2

System DynamicsQ1

Iranian EconomyQ2

Abstract

The performance of banking system in attracting deposits, loan payment and inside money creation may cause the economy facing with potential challenges. Misallocation of resources in banking system and intensifying stagflation, monetary disequilibrium and transmitting its outcomes to real sector, the problems due to differences in maturity date and deviation in allocation of banking credits to productive sectors are items that can be seen in bank-based Iran economy. This paper is investigating System Dynamics effects of inside money creation on Inflation in Iran economy. During 1973-2014 liquidity has been 15100 times more but real GDP has been just 2 times. In this regard there are some important questions. Why liquidity has raised so much in Iran economy? What is the relationship between this increase in liquidity and Inflation in Iran economy? To what extent has the conventional banking system played in causing Inflation and liquidity growth? Specifically, this article will study these questions by analyzing data of Iran economy, based on System Dynamics approach. Results from creating different scenarios show that increase in required reserve ratio for short term deposits up to 100%, ceasing bank’ s lending power from these deposits, increase in required reserve ratio for long term deposits and determining an equilibrium rate by central bank can decrease the power of money creation through banks. This policy will stabilize money supply, price levels and production costs in long run.

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APA: Copy

BAKHSHI DASTJERDI, RASUL, Taleb Baghebani, Mohammadreza, Mojahedi Moakhar, Mohamad Mahdi, & Ahmadniya, Mohammad Saleh. (2019). The system Dynamics Approach to Money Creation Effect on Inflation in Iran Economy. JOURNAL OF ECONOMIC RESEARCH AND POLICIES, 27(89 ), 97-135. SID. https://sid.ir/paper/364114/en

Vancouver: Copy

BAKHSHI DASTJERDI RASUL, Taleb Baghebani Mohammadreza, Mojahedi Moakhar Mohamad Mahdi, Ahmadniya Mohammad Saleh. The system Dynamics Approach to Money Creation Effect on Inflation in Iran Economy. JOURNAL OF ECONOMIC RESEARCH AND POLICIES[Internet]. 2019;27(89 ):97-135. Available from: https://sid.ir/paper/364114/en

IEEE: Copy

RASUL BAKHSHI DASTJERDI, Mohammadreza Taleb Baghebani, Mohamad Mahdi Mojahedi Moakhar, and Mohammad Saleh Ahmadniya, “The system Dynamics Approach to Money Creation Effect on Inflation in Iran Economy,” JOURNAL OF ECONOMIC RESEARCH AND POLICIES, vol. 27, no. 89 , pp. 97–135, 2019, [Online]. Available: https://sid.ir/paper/364114/en

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