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:: Volume 15, Issue 1 (Winter 2020) ::
J. Mon. Ec. 2020, 15(1): 55-74 Back to browse issues page
The Effect of Central Bank's Monetary Policy on Unemployment and Inflation in Provinces of Iran: A GVAR Approach
Nasrin Ebrahimi 1, Mehdi Pedram1, Mir Hossein Mousavi1
1- Faculty of Social Sciences and Economics, Alzahra University
Abstract:   (447 Views)
The national economy of most countries is made up of various regions (provinces) with different industrial composition, financial structure, trade relations, and institutional environment. Depending on these characteristics, regions may respond differently to a uniform national macroeconomic policy. Policymakers should consider these heterogeneities to achieve the national development objective. Using separate VAR models to investigate the regional effects of a uniform policy neglects the spillover effects across regions. The GVAR approach models the links between units (such as regions) using the weighted average of different macroeconomic aggregates. Since Iran is a regionally dispersed country, this motivates us to analyze whether or not a standard monetary policy has different effects on its provinces' unemployment and inflation rates using a GVAR approach during 2005q1-2016q1 period. Results indicate that one standard deviation positive monetary shock at the national level can significantly reduce unemployment in some provinces. These responses are similar in terms of timing, but their intensity is different. Also, this positive shock has a positive effect on inflation in all provinces. All responses are approximately similar in terms of timing. Despite this similarity, shock responses vary in terms of intensity.
Keywords: Monetary Policy, Provincial Effects, GVAR Approach
Full-Text [PDF 785 kb]   (346 Downloads)    
Type of Study: Original Research - Empirical | Subject: Monetary Economics
Received: 4 Feb 2020 | Accepted: 7 Apr 2020 | Published: 20 Jan 2020
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Ebrahimi N, Pedram M, Mousavi M H. The Effect of Central Bank's Monetary Policy on Unemployment and Inflation in Provinces of Iran: A GVAR Approach. J. Mon. Ec.. 2020; 15 (1) :55-74
URL: http://jme.mbri.ac.ir/article-1-483-en.html

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Volume 15, Issue 1 (Winter 2020) Back to browse issues page
Journal of Money and Economy Journal of Money And Economy
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