Title: The role of money multiplier in monetary transmission mechanism in Iran (bank lending and money supply)

Authors: Jafar Haghighat; Tanaz Salahesh

Addresses: Faculty of Economics, University of Tabriz, Iran ' Faculty of Economics, University of Tabriz, Iran

Abstract: Increasing trend of inflation together with high rate of unemployment in Iran, have brought more attention to the effects of monetary policy and central bank power on macroeconomic indexes. As the effect of money multiplier increases, the power of the central bank on the monetary system decreases. Previous researches such as monetary attitude assumes money supply exogenous and the most important factor influencing the monetary policies while post-Keynesians assume money endogenous and they believe in other channels for monetary transmission mechanism. This study focuses on the credit channel and explores the role of money multiplier considering the bank lending channel. The analyses of this study are based on the monthly data of 2 March 2008 up to 20 March 2013 and VAR estimations. The results approve the bank lending channel but not the role of money multiplier in transmission mechanism in Iran.

Keywords: monetary transmission mechanisms; lending channels; reservable deposits; managed liabilities; money multiplier; Iran; bank lending; money supply; inflation; unemployment; monetary policy; central banks; macroeconomic indexes; VAR; credit channels.

DOI: 10.1504/IJMEF.2016.076476

International Journal of Monetary Economics and Finance, 2016 Vol.9 No.2, pp.212 - 223

Published online: 10 May 2016 *

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