Iranian Journal of Economic Research

Endogenous or exogenous money? Evaluating the endogeneity of money supply in Iran by the post-Keynesian approach and the state-space method based on control function

Articles in Press

Document Type : Research Paper

Authors

zahra bigdeli shamloo 1
Abbas Shakeri 2
Teymur Mohamadi 2
Syrous Omidvar 2

1 student

2 Department of Theoretical Economics,Faculty of Economics , Allameh Tabatabai University

https://doi.org/10.22054/ijer.2024.79815.1280
Abstract
The main purpose of this study is to analyze the nature of the money creation process by examining the approaches related to this process in Iran. The two main views regarding the money creation process are the endogenous and exogenous money approaches. The endogeneity of money means that the money supply is directly influenced by the economic activities and conditions in the economy, and it is not determined by central bank exclusively. The endogeneity of money can also be a very important factor in the efficiency and effectiveness of monetary policies on macroeconomic indicators. Therefore, in order to test the endogeneity based on post-Keynesian approaches, the two-stage method of the state-space approach was applied to determine a time-variable model of money supply using the annual data from 1357 to 1400 in Iran. The results indicate: firstly, money is endogenous. Secondly,the effect of explanatory variables on it is not constant over time, and therefore, it is necessary to change monetary policies from targeting on money aggregates according to the conditions of endogenous money.

Keywords

Endogeneity of money
post keynsian
time varying parameter model
state-space model
kalman filter
Subjects
Iranian Journal of Economic Research

Articles in Press, Accepted Manuscript
Available Online from 10 November 2024

  • Receive Date 15 May 2024
  • Revise Date 09 November 2024
  • Accept Date 02 November 2024
  • First Publish Date 10 November 2024

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