Document Type : Original Article
Authors
1 University of Tabriz
2 Department of Economic Sciences, Faculty of Economics, University of Tabriz
Abstract
The main objective of this study is to investigate the effect of the monetary policy transmission mechanism (money volume, monetary base, and liquidity) on GDP through the exchange rate channel in the Iranian economy. In this regard, seasonal data for the period 1375-1399 and the Bayesian autocorrelation model technique have been used. The results of instantaneous shocks from the Bayesian autocorrelation model of production show that the exchange rate plays an important role in the impact of monetary policy on GDP. According to the results obtained, if the percentage of exchange rate changes is equal to the percentage of monetary base changes, the monetary base leads to an increase in production. In other words, the monetary base through the exchange rate channel leads to a positive impact on GDP. This finding is also true for the M1 money volume. The difference between the monetary base transmission mechanism and the money volume through the exchange rate channel is that the impact of the money volume on production is greater than the impact of the money base on production through the exchange rate channel. The results of this study for liquidity show that if the percentage of exchange rate changes is equal to the percentage of liquidity changes, it will have a negative impact on production. In other words, liquidity through the exchange rate channel has a negative effect on Iran's GDP. In general, the results confirm that the monetary policy transmission mechanism through the exchange rate channel is inverted U-shaped and has a positive effect to some extent, and after passing that threshold, it leads to the destruction of GDP.
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