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The Effect of Monetary Policy Shocks on Macroeconomic Variables with Focusing on Central Bank Independence (in Persian)

Author

Listed:
  • Niazi Mohseni, Mohsen

    (Iran)

  • Shahrestani, Hamid

    (Iran)

  • Hojabr Kiani, Kambiz

    (Iran)

  • Ghafari, Farhad

    (Iran)

Abstract

In recent years, the effect of monetary policy on Macroeconomic Variables, and examining the role of central bank independence have been a challenging debate to which it has not produced any similar results in different studies. Accordingly, this study aims at examining the effect of the shock caused by monetary policy on macroeconomic variable considering the index of central bank independence. In this study, according to existing theoretical principles, we estimate Structural Vector Auto Regression (SVAR) which contain Monetary Policy Variables (legal reserve rate & interest rate), index of central bank independence, index of interest rate, inflation rate and oil price and use Impulse Response Function and Variance Decomposition for interpreting the results. In this order, we use Iran’s macroeconomic database from 1978 to 2016. This study came to a conclusion that the increase of legal reserve rate has, on the one side, meaningfully reduced economic growth rate, and, on the other side, central bank independence contributes to Variance Decomposition of inflation and economic growth rates. Additionally, central bank independence affects economic growth rate positively, and inflation rate negatively.

Suggested Citation

  • Niazi Mohseni, Mohsen & Shahrestani, Hamid & Hojabr Kiani, Kambiz & Ghafari, Farhad, 2018. "The Effect of Monetary Policy Shocks on Macroeconomic Variables with Focusing on Central Bank Independence (in Persian)," Journal of Monetary and Banking Research (فصلنامه پژوهش‌های پولی-بانکی), Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 11(36), pages 151-182, September.
    • Handle: RePEc:mbr:jmbres:v:11:y:2018:i:36:p:151-182
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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels

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