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Monetary Shocks Effects on Different Economic Sectors: Using the FAVAR Approach

Author

Listed:
  • Taghizadeh, Hojat

    (Ph.D Candidate in Economics, University of Sistan and Baluchestan)

  • Zamanian, Gholamreza

    (Associate Professor of Economics, University of Sistan and Baluchestan)

  • Harati, Javad

    (Assistant Professor of Economics, University of Bojnord)

Abstract

According to economic conditions, the central bank in monetary policy decisions considered not only information over the economy but also the situation various economic sectors. The purpose of this article is to examine the impact of various economic sectors of a monetary shock on the economy of Iran. Therefore this connection has been reviewed by using the Factor-Augmented VAR (FAVAR) with 215 data variables, during the period 1990:02 to 2017:01. The results suggest that the added value of different sectors show different responses facing a monetary shock. In a way that So that the service group has a higher sensitivity to monetary shocks than the mining and agricultural sector and the oil sector does not show a significant response to monetary shocks. According to the different impact of different economic sectors, central banks and monetary authorities should consider all sectors reaction when the monetary policy actions, in order to be more precise in planning the national economy.

Suggested Citation

  • Taghizadeh, Hojat & Zamanian, Gholamreza & Harati, Javad, 2018. "Monetary Shocks Effects on Different Economic Sectors: Using the FAVAR Approach," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 4(4), pages 1-26, March.
    • Handle: RePEc:ris:qjatoe:0088
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    More about this item

    Keywords

    Monetary policy; Factor-Augmented VAR; Reaction of various economic sectors; Monetary transmission mechanism.;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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