Economic Strategy

Economic Strategy

Investigating and Analyzing of the Concept of Exogeneity of Money and Its Effects on Iran's Economy

Document Type : Original Article

Authors
Kosar Moradi 1
Kiomars Sohaili 2
shahram Fattahi 3
1 M.A. in Economics, Department of Economics, Faculty of Economics and Accounting, Razi University, Kermanshah, Iran.
2 Professor, Department of Economics, Faculty of Economics and Accounting, Razi University, Kermanshah, Iran
3 Associate Professor, Department of Economics, Faculty of Economics and Accounting, Razi University, Kermanshah, Iran.
10.22034/es.2025.497172.1828
Abstract
Inflation and monetary base are two important concepts in the economy that are closely related to each other and are important in the economy of any country including Iran. Inflation refers to the continuous and significant increase in the prices of products and services, and the monetary base includes physical money and bank reserves with the central bank, which is created by this institution. If the increase in the monetary base is the cause of inflation, the money is exogenous, and if the increase in inflation is the cause of the growth of the monetary base, money is endogenous. The current research aims to investigate and analyze empirically the exogenity of money and its consequences in Iran using the var vector autoregression model and the Granger causality test using EViews software for the years 1991-2021. The findings of the research indicate that the growth rate of currency, inflation and budget deficit are positively and significantly related to the growth rate of the monetary base. Therefore, the exogenity of money is confirmed during this period of time. Also, the findings of the causality test indicate the existence of a strong one-way causal relationship between the monetary base and inflation, and the direction of causality is from the monetary base to inflation, and according to the scatter diagram obtained from the spss software, the existence of a strong correlation between inflation and the monetary base has been proven.
Keywords
Inflation
Monetary base
Exogeneity of Money
Vector Autoregression Model
Iran

Subjects

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  • Receive Date 25 September 2024
  • Revise Date 20 January 2025
  • Accept Date 15 February 2025