Monetary and financial policies in Iran’s economy through using money neutralization tests

Abstract

This study investigates being neutral and non-neutral monetary and finance policies (anticipated and not anticipated) and also the test of rational expectations hypothesis for the period between 2004-2011 through Seemingly Unrelated Regressions (SUR) econometric technique. The results of the study indicate that the anticipated and unanticipated monetary policy is neutral but the anticipated financial policies have positive and significant effect on the real production level. Also, taking into account the significance of anticipated monetary policies and the unanticipated monetary policies not being significant, we cannot accept the hypothesis of rational expectations for Iran’s economy. On the basis of the gained results regarding policy making we can emphasize the fact that, in order to excite production in Iran’s economy, we can seek help from financial policies although we should not overlook the sanction effects of this policies.