the conduct of monetary policy in an oil economy with a managedfloating exchange rate regime can be challenging in an environment of fiscaldominance and incomplete transition to a market economy. the five-yeardevelopment plans provide a natural benchmark against which to assess monetarypolicy performance in iran.price stability has proved elusive, with liquidity growth targets constantlyexceeded by a large margin. the paper examines the reasons behind these resultsand, based on the lessons that can be drawn from the literature and theinternational experience, makes some proposals on how to improve on thisrecord. although fiscal dominance remains the main obstacle to disinflation,reforms to strengthen the anti-inflationary mandate and the operationalindependence of the central bank, and more effective monetary instruments arealso needed.
jel classification: e31,e51