Abstract for: Effects of Government Intervention in Interest Rates: Case of Iran
Government intervention in economy can be aimed at a variety of political or economic objectives, such as promoting economic growth, increasing employment, raising wages, raising or reducing prices, promoting equality, managing the money supply and interest rates, increasing profits, or addressing market failures. Advocates of free market or laissez-faire economics tend to see government intervention in the economy as harmful, due the fallacy of central planning, the law of unintended consequences, and other considerations. They believe “government intervention for economy make things worse”. In this paper we model the intervention of Iranian government in interest rates and consequences of this intervention which was increase of bank debts to Central Bank and also inflation. At the end, we offer two policies to solve high inflation and increasing bank debts.