_cr04308.pdf - 2004 International Monetary Fund September...

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© 2004 International Monetary Fund September 2004 IMF Country Report No. 04/ 308 Islamic Republic of Iran Selected Issues This Selected Issues paper for the Islamic Republic of Iran was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on August 27, 2004 . The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of the Islamic Republic of Iran or the Executive Board of the IMF. The policy of publication of staff reports and other documents by the IMF allows for the deletion of market-sensitive information. To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to [email protected] . Copies of this report are available to the public from International Monetary Fund Publication Services 700 19th Street, N.W. Washington, D.C. 20431 Telephone: (202) 623 7430 Telefax: (202) 623 7201 E-mail: [email protected] Internet: Price: $15.00 a copy International Monetary Fund Washington, D.C.
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INTERNATIONAL MONETARY FUND ISLAMIC REPUBLIC OF IRAN Selected Issues Paper Prepared by a staff team consisting of Abdelali Jbili, Vitali Kramarenko, and José Bailén (all MCD) Approved by the Middle East and Central Asia Department August 27, 2004 Contents Page CHAPTER I: Economic Growth in the Islamic Republic of Iran .............................................. 4 I. Overview .............................................................................................................................. 4 II. Growth Literature: Stylized Facts ........................................................................................ 4 III. Growth Performance in Iran ................................................................................................. 7 IV. Sources of Growth ............................................................................................................. 11 A. Growth Accounting ...................................................................................................... 11 B. Empirical Analysis of Factors Affecting Non-oil GDP Growth .................................. 14 C. Sectoral Growth ........................................................................................................... 16 V. Policy Lessons .................................................................................................................... 17 References ................................................................................................................................ 20 Appendix I: Data Sources and Methodology ........................................................................... 19 CHAPTER II: Issues in Medium-Term Management of Oil Wealth ....................................... 22 I. Introduction ........................................................................................................................ 22 II Long-run Considerations .................................................................................................... 23 A. Analytical Framework for Long-Run Analysis ............................................................ 23 B. Implications for Iran of Long-Run Analysis ................................................................ 26 III. Consistency of the Baseline Medium-Term Framework with Long-Term Parameters ..... 30 IV. Conclusion ......................................................................................................................... 33 References ................................................................................................................................ 34
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- 2 - Appendices I. The Oil Stabilization Fund ................................................................................................. 35 II. Subsidies in Iran ................................................................................................................. 36 CHAPTER III: The Iranian Financial Landscape .................................................................... 37 I. Introduction ........................................................................................................................ 37 II. Overview of the Financial System ..................................................................................... 38 A Banks and Non-Bank Credit Institutions ..................................................................... 38 B. Capital Markets and Insurance ..................................................................................... 41 C. Foreign Exchange Market ............................................................................................ 45 III. Governance and Regulatory Oversight . ............................................................................. 46 IV. Reform Agenda .................................................................................................................. 50 A. Banking System ........................................................................................................... 50 B. Capital Markets and Insurance ..................................................................................... 51 C. Capital Account Liberalization .................................................................................... 52 V. Conclusion ......................................................................................................................... 52 References ................................................................................................................................ 54 CHAPTER IV: Moving Toward Market-Based Monetary Policy . .......................................... 55 I. Introduction ........................................................................................................................ 55 II. Lessons from Iran’s Experience in Monetary Policy Implementation ............................... 55 A. Institutional Set-up ....................................................................................................... 55 B. Instruments of Monetary Policy and Key Challenges .................................................. 57 III. Next Steps .......................................................................................................................... 62 A. Monetary Policy Framework ........................................................................................ 62 B. Shariah-Compliant Indirect Instruments of Monetary Policy . ..................................... 66 IV. Conclusion . ........................................................................................................................ 68 References ................................................................................................................................ 69 Text Boxes 2.1. Optimal Consumption Out of Hydrocarbon Wealth .................................................... 24 3.1 Specialized Banks . ....................................................................................................... 39 3.2
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