Role of Interest Rates on Gross Domestic Production in Iran

moosa nejati¹

1) M.sc of Economic Sciences (corresponding author),

IOI Code : XYDG-AGFEZ
Publication : 1ST International Conference on Researches in Accounting, Economics, Management & Humanities (meaconf.com/1st)
Abstract :
    Structural issues in the banking system and economic sanctions have led to Iran s inability in financing from international routes, so its economy system reliance on monetary- banking system have been increased strongly and this increased high-impact of interest rates on investments in the manufacturing sector and consequently on economic variables. So such factors compounded importance of the role of interest rates in GDP in Iran. The present paper aims to evaluate effect of interest rates on production in Iran between 1981-2013 using vector regression models. The model estimation results indicate that interest rate negatively affect influences GDP. The empirical results suggest that upon increasing labor wages, GDP increases (labor has positive impact on GDP in Iran) so that with increased wage rates, labor supply curve shifted to the right and labor demand curve to tends to left. The model estimation showed that the labor supply curve is outweigh demand leading to transfer of aggregate supply curve to the right and hence more GDP. Lastly, according to model estimation it can be noted that productivity impact on GDP is positive as expected.

Keywords : loan interest rate production investment productivity var