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Identification of the Most Important Variables Affecting the Mechanism of Monetary Policy Transmission in the Iranian Economy with the Dynamic Model Averaging Approach

Author

Listed:
  • Rahimi, Majid

    (Phd student of economics of Islamic Azad University, Aliguderz branch)

  • Nadri, Kamran

    (Associate Professor, University of Imam Sadegh)

  • Yazdani, Mehdi

    (Associate Professor, University of Shahid Beheshti)

Abstract

Many economists agree that monetary policy affects the real sector of the economy in the short term, but their disagreement is over the channels of influence and their relative importance. The research's main purpose was to identify the most important mechanism of monetary policy transmission in the Iranian economy with the dynamic model averaging approach. Thirty-four variables affecting monetary policy transmission through the neoclassical channel and twenty-two variables affecting the monetary transmission mechanism in the non-neoclassical model were entered into the model. According to the results, the neoclassical channel has a higher share in the monetary mechanism transmission system than the non-neoclassical channel.According to the results, the most important channels of monetary policy transmission in the Iranian economy are the effective real exchange rate variables, free-market interest rate, informal exchange rate deviation from the formal, total stock index growth rate, land price index in Tehran, the volume of money, total debt to the banking system and the growth rate are credits granted to the private sector. According to the results, total debt to the banking system, free-market interest rate and informal exchange rate deviation from the formal had a negative effect on economic growth and other variables had a positive effect on economic growth

Suggested Citation

  • Rahimi, Majid & Nadri, Kamran & Yazdani, Mehdi, 2022. "Identification of the Most Important Variables Affecting the Mechanism of Monetary Policy Transmission in the Iranian Economy with the Dynamic Model Averaging Approach," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 9(2), pages 151-190, September.
    • Handle: RePEc:ris:qjatoe:0271
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    More about this item

    Keywords

    Monetary Policy Transfer Mechanism; Neoclassical Channel; Non-Classical Channel; Dynamic Average;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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