The Effect of Central Bank's Financial Strength on Inflation in Iran

One of the most important principles in the successful implementation of monetary policy is the central bank's financial strength, which can have significant impacts on the success of the implementation of these policies. Therefore, in this study, the effect of the central bank's financial strength on the inflation rate of the Iranian economy in the period of 1978 to 2015 has been studied. Also, the method used to estimate the model is Autoregressive Distributed Lag (ARDL). The results of this study indicate that the increase of the central bank's financial strength during the short and long term reduced the price index by -0.66% and -0.16%, respectively. The increase of the central bank's financial strength puts the central bank's balance sheet in a good place, as well, it will increase the efficiency of its monetary policies of this entity and reduce inflation rate