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Interventions of the central bank on the sustainability of government debts in the framework of the inflation targeting model in recession and boom regimes
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Ali Nasiri1   , Hamid Asaish2 , Mohsen Mehrara3 , Meytham Mousaaei4 |
1- PhD student in the Department of Economics, Aliguderz Branch, Islamic Azad University, Aliguderz, Iran
2- Associate Professor, Department of Economics, Aligudarz Branch, Islamic Azad University, Aligudarz, Iran , hamid.asayesh@abru.ac.ir
3- Professor and member of the Faculty of Economics, University of Tehran
4- Professor, Department of Social Planning, University of Tehran, Tehran, Iran. |
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Abstract: (656 Views) |
In this study, we seek to investigate the effect of central bank interventions on the sustainability of government debts in the framework of the inflation targeting model in recession and boom regimes. For this purpose, the effect of study variables during the period of 1373 to 1399 is investigated by using the rotation model and Markov switching regime change. The estimation results of the Markov model for periods of recession and prosperity show; The central bank's intervention index, exchange rate deviations from the long-term path, inflation and liquidity targeting during recessions and booms have led to an increase in government debt. Looking at the effectiveness of the government debt compared to the study indicators, it can be said that the main factors affecting the increase in the government debt are currency fluctuations and central bank's currency interventions. With the increase in currency fluctuations in Iran's economy, due to problems such as government mismanagement, corruption and rent, political instability and sanctions, instead of entering the production sector and value-added sectors, the funds have been spent on imports, which due to the country's recession-inflation conditions, for Inflation is dealt with. Therefore, the production sector faces serious damage. In other words, in the inflationary conditions of Iran's economy, long-term investments are spent on short-term expenses, which results in an increase in debt and a worse economic situation.
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Article number: 9 |
| Keywords: central bank intervention pressure, government debt, inflation targeting, Markov switching regime change model |
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Full-Text [PDF 1152 kb]
(174 Downloads)
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Article type: Research |
Subject:
Special
Received: 2023/11/23 | Accepted: 2024/03/1 | Published: 2024/08/31
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