The aim of this paper is determination of an optimal policy rule for Iranian economy from an Islamic perspective. This study draws on an Islamic instrument known as the Musharakah contract to design a dynamic stochastic general equilibrium model. In this model the interest rate is no longer considered as a monetary policy instrument and the focus is on the impact of economic shocks on the Dynam...

this research follows two aims in case of the iranian economy. first, study of the presence of inflation persistency, and second, looking for an optimal monetary policy rule. results show that inflation in the economy of iran is persistent, in which, short-term and long-term effects of monetary policy should be considered. for this purpose, a loss function for the central bank with arguments of...

Standard monetary policy analysis built upon the New Keynesian model suggests that an optimal monetary policy rule is one which minimizes a weighted sum of the variance of inflation and the variance of the output gap. As one might expect, the Taylor rule evaluates well under this criteria. Recent calls for nominal GDP targeting therefore must contend with Taylor rule as an alternative approach ...

Using a standard open economy DSGE model, it is shown that the timing of asset trade relative to policy decisions has a potentially important impact on the welfare evaluation of monetary policy at the individual country level. If asset trade in the initial period takes place before the announcement of policy, a national policymaker can choose a policy rule which reduces the work effort of house...

Monetary policy rule might be helpful to avoid the problem of time inconsistency provided there is a commitment to the rule. The commitment is the ability of a government to bind future policies. However, it doesn’t include intrinsic motivations. Therefore, hegemony, which includes both intrinsic and extrinsic motivations, better solves the problem of  time inconsistency. In this paper, we expl...

This paper estimates a sticky-information general-equilibrium model for the United States and the Euro-area, and uses it as a laboratory to answer monetary policy questions. The …rst set of questions is positive and concerns describing past monetary policy: what policy rule has best described policy? What has been the role of stabilization policy? How large have policy errors been? What is the ...

Financial frictions and financial shocks can affect the trade-off between inflation stabilization and output-gap stabilization faced by a central bank. Financial frictions lead to a greater response in output following any deviation of inflation from target and thus lead to an increase in the sacrifice ratio. As a result, optimal monetary policy in the face of credit frictions is to allow great...