Central Bank's Foreign Exchange Management in Line with Article 2 of the General Policies of the Seventh Development Plan under Economic Sanctions: DSGE Approach

Articles in Press

Document Type : Research Paper

Authors

1 Assistant Professor of Economics, Shahid Beheshti University

2 Assistant Professor, Faculty of Governance, University of Tehran, Tehran, Iran

Abstract

Given the widespread use of economic sanctions and the introduction of new sanction regimes since the early 2010s, and the potential application of a maximum pressure policy in a second Trump administration as a tool for economic-political pressure, this study aims to provide a framework for evaluating the Central Bank's foreign exchange management in line with Article 2 of the general policies of the Seventh Development Plan under economic sanctions. For this purpose, the DSGE method with a New Keynesian approach was used to simulate the impact of oil and financial sanctions on the Iranian economy for the period 1991-2024. The central focus of this research is the application of optimal monetary policies to reduce the Central Bank's losses under sanction conditions. Simulation results show that implementing optimal monetary policies, with a focus on controlling inflation and reducing the output gap under intensified oil and financial sanctions, can significantly reduce the Central Bank's losses, especially by focusing more on inflation control, through managing the foreign exchange market and creating stability in the exchange rate and consequently the inflation rate, as well as reducing pressure on domestic production inputs, in accordance with Article 2 of the general policies of the Seventh Development Plan.

Keywords

Main Subjects

Applied Theories of Economics

Articles in Press, Accepted Manuscript
Available Online from 04 October 2025

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