The Relationship between Federal Reserve Monetary Policy with the Dollar value , Oil and Gold Prices, Lessons for Monetary and Financial Policymakers in Iran

Heibati, Nazli; Hosseini, Shamseddin; Safavi, Bijan; Zandi, Fatemeh

The Relationship between Federal Reserve Monetary Policy with the Dollar value , Oil and Gold Prices, Lessons for Monetary and Financial Policymakers in Iran

Document Type : Original Article

Authors

Nazli Heibati ¹

Shamseddin Hosseini ²

bijan safavi ³

Fatemeh Zandi ³

¹ Ph.D student of economics, Faculty of Economics and Accounting, Islamic Azad University, Tehran Branch, South Tehran, Iran

² economy faculty member of Allameh Tabataba'i University

³ Department of Economics, Faculty of Economics and Accounting, Islamic Azad University, South Tehran Branch, Tehran, Iran

Abstract

It is important for Iranian policymakers to examine the relationship of US Federal Reserve policies as the world's largest economy to oil, gold and the dollar. Because oil prices and the value of the dollar are both determinants of fiscal policy in the Iranian budget. In addition, from the perspective of the central bank's foreign reserves, changes in gold prices and the value of the dollar are important for the monetary policymaker to optimize the portfolio. In this study, we tried to investigate the relationship between these policies and the desired variables using the threshold error correction model with the help of daily statistics from 2001 to 2018. Based on the results, the effective interest rate on the Federal Reserve has an effect on oil prices (in the short run and in the long run), gold (in the short run), and the dollar (in the long run). Therefore, consideration of effective federal funds rate is recommended for the financial and monetary policy maker when predicting oil prices, dollar values, and gold prices.

Keywords

Federal Reserve

dollar value

oil price

gold price

threshold error correction model