Nonlinear Transmission Mechanisms of Monetary Policy into Industrial Sector: A Markov Switching Vector Auto Regressive Approach (MSVAR)

Hosseinzadeh, Hojjat; Asgharpur, Hossein; Haghighat, Jafar

doi:10.30473/jier.2023.65966.1353

Document Type : applicative

Authors

¹ PhD of financial and monetary Economics, Faculty of Economics and Management, University of Tabriz, Tabriz, Iran.

² Professor, Department of Economic, Faculty of Economics and Management, University of Tabriz, Tabriz, Iran.

https://doi.org/10.30473/jier.2023.65966.1353

Abstract

In order to implement a successful monetary policy, monetary authorities must have a correct assessment of the time and extent of the impacts of this policy on economic variables in different conditions. In this article, using the quarterly data of Iran's Central Bank, the contribution of different channels of monetary policy effects on the production of manufacturing sector and the general level of prices in the period of 1994-2008 will be determined. For this purpose, while using the Markov Switching Vector Autoregressive Method (MSVAR), two endogenous and exogenous models are estimated under two regimes of zero and one. Considering Iran's Bank based financing system, it is expected that the credit channel will play an active role in transferring money to the production sector. The results of this research confirmed the effect of monetary policy on production and inflation through the credit channel in both regimes. Also, the results confirm that currency rate and housing channels have been effective in transferring the effect of monetary policies to production and the general level of prices. Considering the high cost of housing rent in Iran, it was found that housing price fluctuations in the regime zero have more inflationary effects than in the regime one. Compared to other channels, the stock price channel has had less impact on the transmission of monetary policies on the level of production and inflation. According to the above results, it is necessary to pay more attention to currency stability, and in addition, pay more attention to the capital market as a suitable tool for directing resources to productive activities.

Keywords

Main Subjects

Industrial Economics, Structure_Conduct-Performance

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Journal of Industrial Economics researches

Nonlinear Transmission Mechanisms of Monetary Policy into Industrial Sector: A Markov Switching Vector Auto Regressive Approach (MSVAR)

References

References

Volume 6, Issue 22
November 2023
Pages 65-88

Nonlinear Transmission Mechanisms of Monetary Policy into Industrial Sector: A Markov Switching Vector Auto Regressive Approach (MSVAR)

References

References

Volume 6, Issue 22November 2023Pages 65-88

Volume 6, Issue 22
November 2023
Pages 65-88