The Relationship between Monetary Base Components and Real and Nominal Sectors in Iran's Economy

According to economic views, money can have nominal and real effects on economic variables. Meanwhile, changes in the monetary base in the economy can be considered a function of the changes in the central bank's financial assets. Central banks in countries are responsible for issuing banknotes. This bank uses foreign exchange reserves, gold reserves, claims from the government and claims from banks as a basis for issuing banknotes. The debt of the central bank is also the bills and securities in the hands of the people, the legal, additional and precautionary reserves of commercial banks. The main purpose of this paper was to examine the relationship between monetary base components and production and inflation in Iran's economy. In this regard, using the autoregressive distributed lag (ARDL) in the time periods of 1989-2022, the relationship between the variables was estimated. The obtained results showed that the variable effect of commercial banks' debt to the central bank on production and inflation is 0.33 and 0.62, respectively, and the net effect of public sector debt to the central bank on production and inflation is 42, respectively. 0.0 and 0.57. Considering the results obtained and the importance of paying attention to the contribution of each component of the monetary base on inflation and production in the country, the central bank should pay more attention to changing the share of the components of the monetary base and be disciplined in the growth of the sectors that have a high contribution to the country's inflation.