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:: Volume 15, Issue 2 (Spring 2020) ::
J. Mon. Ec. 2020, 15(2): 151-180 Back to browse issues page
The Impact of Domestic and Foreign Monetary Policy on Iran's economy: Global Modeling
Simin Akbari Dehbaghi1 , Seyed Aziz Arman 1, Majid Ahangari1
1- Faculty of Economic and Social Sciences, Shahid Chamran University of Ahvaz
Abstract:   (451 Views)
One of the striking features of the business cycles is the patterns of co-movement of output, inflation, interest rates, and real equity prices across countries. This paper empirically examines the effects of domestic and foreign monetary policies on Iran's macroeconomic variables (including real production, inflation, short-term interest rate, and real exchange rate) using quarterly data over the 1996Q1-2015Q4 period and a global vector auto-regression model (GVAR) for Iran, the largest trading partners of Iran including China, India, Russia, South Korea, Turkey, the European Union, and the United State. The results of domestic monetary policies on Iran's macroeconomic variables illustrate a form of Price Puzzle on how monetary policy shocks affect inflation in Iran. The effects of the positive shocks of domestic interest rate on real GDP in Iran is negative. Iran's real exchange rate response to the positive shock of domestic interest rates is negative and significant. The results regarding the impact of the foreign monetary policies on Iran's macroeconomic variables illuminate that only the effects of a positive shock to China's interest rate are significant and negative on Iran's inflation. Besides, there is a significant independency of Iran's real GDP to the monetary policy shocks of the other trading partners of Iran. Also, the response of Iran's real exchange rate to positive monetary shocks in the EU and Turkey is at a positive and significant level. The results indicate that due to the closed economic structure of Iran, global economic crises that lead to a recession in other countries have had the least impact on the Iranian economy.
Keywords: Global Spillover, Global VAR, Monetary Policy
Full-Text [PDF 813 kb]   (415 Downloads)    
Type of Study: Original Research - Empirical | Subject: Economics
Received: 9 Oct 2019 | Accepted: 15 Mar 2020 | Published: 22 Apr 2020
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Akbari Dehbaghi S, Arman S A, Ahangari M. The Impact of Domestic and Foreign Monetary Policy on Iran's economy: Global Modeling. J. Mon. Ec.. 2020; 15 (2) :151-180
URL: http://jme.mbri.ac.ir/article-1-450-en.html

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Volume 15, Issue 2 (Spring 2020) Back to browse issues page
Journal of Money and Economy Journal of Money And Economy
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