University of Tehran Iranian Economic Review 1026-6542 22 4 2018 10 01 The Calculation of the Monetary Condition Index (MCI) in Iran Economy (1978–2012) 934 955 67850 10.22059/ier.2018.67850 EN Hamidreza Horry Shahid Bahonar University of Kerman Sayyed Abdolmajid Jalaee Esfand Abadi Shahid Bahonar University of Kerman Mehdi Nejati Department of Economics, University of Shahid Bahonar, Kerman, Iran Siminossadat Mirhashemi Naeini Department of Economics, University of Shahid Bahonar, Kerman, Iran Journal Article 2016 11 25 T<br /> <br /> <br /> <br /> <br /> <br /> <strong><span style="text-decoration: underline;"> </span></strong><br /> he completed MCI includes three main channels of interest rate, exchange rate and credit rate. In developing countries such as Iran, this indicator, which contains a credit channel, could be better used to illustrate the country’s monetary condition. This study has been done to calculate this index for the period of 1978–2012. For this purpose, the function of the total economy demand is estimated in order to extract the variables weight in this index, using the <em>self</em>-<em>explanatory Autoregressive Distributed Lag</em> (<em>ARDL</em>) approach. According to the model estimation results, the exchange rates weights are higher than interest rate channel in the MCI calculation. Using the weights derived from the model estimation, the nominal and real MCI have been calculated. Eventually, by estimating the inflation equation and comparing the root mean squared error (RMSE) of the two, it has been found that the predictive power of inflation in the real MCI is higher than the nominal.<br />   https://ier.ut.ac.ir/article_67850_6dbfcb4f0e23183f18cfd37f71c649d3.pdf