Examining the Reasons for the Lack of Control of Iran’s Central Bank on the Monetary Base and Volume of Money (Case Study of First and Second Development Plans)

Abstract

This paper presents effects of inappropriate monetary policy and the reasons that led to such policies. In Iran after the Islamic Revolution the Bankruptcy Banking Act was passed.
As explained in this paper, the law does not provide the necessary tools for applying monetary policy to the central bank. due to the lack of control of the Central Bank of the Islamic Republic of Iran in the foreign exchange and budget developments of the country, its role in controlling the volume of money in Iran is very limited. Therefore, the government sector (with full authority over foreign currency decisions, oil exports rate and the country’s budget) is only the competent authority to control the volume of money in Iran, which means that the government can make reasonable growth and balanced Monetary Base and as a result, the volume of money in the economy by choosing appropriate currency and budget policies.
Keywords: monetary base, money multiplier, volume of money
JEL: E52, E43