TY - JOUR JF - JSE JO - jemr VL - 3 IS - 9 PY - 2012 Y1 - 2012/10/01 TI - Extended Taylor Rule: Empirical Evidence from Iran 1979-2008 TT - قاعده‌ی گسترش یافته تیلور: مطالعه موردی ایران 86-1357 N2 -   The ultimate goals of the monetary policy are price stability and the output growth. Monetary policy instruments are interest rate and the growth rate of monetary base. One of the well-known rules in conducting monetary policy is Taylor rule, through which, central banks change the interest rate while taking into account the output and inflation distortions. There are two problems with applying Taylor rule in Iran: First, the weak micro-foundation of the rule and second, according to this rule specially in the short run, instead of interest rate the policy variable is the growth rate of the monetary base. This research extends Taylor rule by explaining micro-foundation of the rule. So, using Generalized Method of Moments (GMM), we investigated the consistency of the Iranian central bank’s reaction function with extended Taylor rule in the period 1979- 2008. The empirical results show that although monetary authorities react appropriately with respect to output distortion, but their reaction is not appropriate with respect to inflation distortion. SP - 1 EP - 19 AU - Taghinezhadomran, Vahid AU - Bahman, Mohammad AD - Mazandaran University KW - Monetary policy KW - Taylor’s rule KW - Reaction function KW - GMM KW - Iran. UR - http://jemr.khu.ac.ir/article-1-465-en.html ER -