Deficits, Debt Financing, Monetary Policy and Inflation in Developing Countries: Internal or External Factors? Evidence from Iran

The Effect of Financial Globalization on Monetary Policy Discipline: The Evidence from 22 Developing Countries

The literature on the benefits and costs of financial globalization for developing countries has exploded in recent years. There seems to be a consensus that financial globalization has had a "discipline effect" on monetary policy, because it has reduced the returns from using monetary policy to stabilize the output. As a result, monetary policy over recent years has placed more emphasis o...

Fiscal and Monetary Policy in a Monetary Union: Credible Inflation Targets or Monetised Debt?

The paper examines the interrelationship between fiscal and monetary policy in a two-country monetary union. The worst scenario occurs when an independent central bank (CB) sets the nominal interest rate and responds to rising government debt/GDP ratios by monetisation. The result is high inflation, high debt/GDP ratios and a large public sector. Government debt and inflation are contained if t...

External Financing Method: Financing through Debt and Stock Issuance

Countries need short, medium, and long-term investment plans for production growth and development. Different sources for these investments can be supplied through retained profit, stock issuance, and bank loans, or a combination them. Institutions and firms need huge amount of capitals for their survival, production, and also development of activities. In addition, these institutions and firms...

Debt, Deficits, and Destabilizing Monetary Policy in Open Economies

Blanchard (2005) suggested that active interest rate policy might induce unstable dynamics in highly-indebted economies. We examine this in a dynamic general equilibrium model where Calvo-type price rigidities provide a rationale for inflation stabilization. Unstable dynamics can occur when the CB is aggressively raising the interest rate in response to higher expected inflation. The constraint...

Monetary Policy in Iran: The Challenge of Reducing Inflation

The conduct of monetary policy in an oil economy with a managed floating exchange rate regime can be challenging in an environment of fiscal dominance and incomplete transition to a market economy. The Five-Year Development Plans provide a natural benchmark against which to assess monetary policy performance in Iran. Price stability has proved elusive, with liquidity growth targets constan...

Essays in inflation and monetary dynamics in developing countries