Document Type : Research Paper


Professor, Faculty of Economics, Allameh Tababtabai University


This paper is based on a cointegrated I(2) and I(1) variables models money, price, output, real effective exchange rate and interest rates in Iran over period 1990 quarter 1-2006 quarter 4. The empirical findings demonstrated long-run homogeneity between price and money was broken down and the hypothesis of  the stable money demand relationship was  not confirmed in the period, instead of this we found a relation which determines inflation  based on  liquidity ratio and real effective exchange rate. Money supply growth significantly explains output growth in the period. In addition, the paper provides further insights about the effects of financial repression on output and determining the behavior of opportunity cost of money in Iran.

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