1
Assistant Professor, Faculty of Economics and political science, Shahid Beheshti University
2
Ph.d Student of Economics, Edalat University
Abstract
The aim of this paper is to assess –on both theoretical and empirical grounds–the two main views regarding the money creation process, namely the endogenous and exogenous money approaches. After analysing the main issues and the related empirical literature, we will apply a VAR and VECM methodology to the Iran in the period 1379-1398 to assess the causal relationship between a number of critical variables that are supposed to determine the money supply, i.e., the monetary base, bank deposits and bank loans. The empirical analysis carried out supports the endogenous money approach.
