Investigating the Role of Monetary and Fiscal Policy Tools on Economic Growth Using Dynamic Simulation and Fuzzy Control Approach


Department of Economics, Shahid Chamran University, Ahvaz, Iran.


In this study, a macro-economic model consisting of twelve behavioral equations and fourteen identity equations was estimated with the aim of investigating the effectiveness of monetary and fiscal policies set out in the fourth and fifth development plans. In the estimated model, the variables of development expenditures, current expenditures and tax revenues are used as fiscal policy tools and variables of liquidity and long-term interest rates of bank were used as monetary policy tools. The results of solving the model using a dynamic simulation showed that by the implementation of this scenario, one can achieve a steady growth rate for model’s endogenous variables during the period and reduce its deviation from target values. Then, a fuzzy control system was designed with the aim of minimizing deviations and changes in the deviation of non-oil GDP from the values determined in the fourth and fifth development plans. Liquidity variables and government development expenditures were used as control tools in this system. Results obtained from the fuzzy system showed that using control rules, the growth rate of liquidity can be put at a lower level and growth rate of development expenditure around quantified targeted values in the fourth and fifth development plans. Also, the oscillation amplitude of the inflation and growth rates of non-oil production can also be reduced.


Cooper, R. N. (1969). Macroeconomic Policy Adjustment in Interdependent Economies. The Quarterly Journal of Economics, 83(1), 1–24.
Hagen, V., Hallett, J. H., & Strauch, R. (2001). Budgetary Consolidation in EMU. Economic Papers, 148, Retrieved from
Imoudu, E. C., Anthony, E., & Zakaree, S. (2012). Counter-Factual Analysis of the Nigerian Economy: A Test of the Relative Potency of Monetary and Fiscal Policies. International Journal of Business, Humanities and Technology, 2(4), 111-124.
Laurens, B., & Piedra. E.G. (1998). Coordination of Monetary and Fiscal Policies. International Monetary Fund, Working Paper, WP/98/25, Retrieved from,d.bGg.
Zarra-Nezhad, M., Motamedi, S., Montazer Hojat, A. H., & Anvari, E. (2015). An Investigation into the Efficiency of Monetary and Fiscal Policies in Iran Case Study: The 4th Economic Development Plan. Asian Economic and Financial Review, 5(5), 734-746.
Niemann, S., & Hagen. J. V. (2008). Coordination of Monetary and fiscal Policies: A Fresh Look at the Issue. Swedish Economic Policy Review, 15(1), 89-124.
Nordhaus, W. D. (1994). Policy Games: Coordination and Independence in Monetary and Fiscal Policies. Brookings Papers on Economic Activity, 25(2), 139–216.
Shakeri, A., Mohammadi, T., & Moosalou. Y. (2007). Economic Policy Making of Development Plans in the Framework of an Optimal Control Model. Economic Research, 7(24), 15-46.
Tinbergen, J. (1954). Centralization and Decentralization in Economic Policy. Retrieved from
Udah, E. (2009). A Dynamic Macroeconomic Model of the Nigerian Economy with Emphasis on the Monetary Sector. SAJEMS, 12(1), 28-47.