Document Type : Research Paper

Authors

• Yousof Mohajeranirad ¹
• Nasim Babaee ²

¹ Ph.D. in Economics, Faculty of Economics, University of Tehran, Tehran, Iran

² Ph.D in Economics, Faculty of Economics, University of Shahid Beheshti, Tehran, Iran

Abstract

The present study attempts to specifically analyze the impact of the central bank's foreign assets by emphasizing the systemic impact on the economy using dynamic system simulations. In order to simulate, a model based on the relationships of variables in the economy should be developed focusing on the role of the central bank in these relationships to be able to track the impact of changes in the economic system and extract the final effects. Therefore, by developing a structural macroeconomic model and using bounding ARDL from 1973-2018, the results of this study indicate that output, investment, inflation and employment in Iran are strongly affected by increasing one unit standard deviation in the foreign assets of the Central Bank .With an increase of 12.3% of the foreign assets of the Central Bank, it leads to an increase in output, investment and employment by 7.82, 4.62 and 0.08%, respectively. While, the increase in foreign assets of the central bank will lead to an increase in inflation by 11.29%. Based on these results, it is proposed, the central bank should pay attention to the severe inflationary effects of the increase in foreign assets for implementing its foreign exchange policies in order to manage the floating exchange rate and implement appropriate monetary and exchange rate policy depending on the current situation in the country.

Keywords

• Central Bank'
• s Foreign Assets, Employment, Inflation, Investment

Main Subjects

• Applied Microeconomics