Determination of Interest Rate in Iran by using Fuzzy logic Method

Interest rate is one of the most important monetary policy instrument in an economy. The changes in interest rate leads to changes in other key economic variables like cost of production, Consequently changes in output and price level. However, like the other developing countries, lack of the advanced financial markets and governmental determination of interest rate , the market interest rate cant be observered in Iran. For this purpose, the main objective of this study is to estimate market interest rate index by using information on proxy variables such as inflation rate, rate of return on housing and amount of liquidity in economy during 1981-2012 by using fuzzy logic method. The empirical result indicates that interest rate has shown a lot of fluctuations over time. The maximum (78/7) and minimum (22/4) interest rate index has been in years 1995 and 1985 respectively.