Monetary Policy and MacroEconomic Uncertainties in Iran: an Empirical Approach with Time-Frequency Analysis

Saleh Taheri Bazkhaneh ()
Additional contact information
Saleh Taheri Bazkhaneh: Assistant Professor, Faculty of Literature and Humanities,University of Guilan,Rasht,Iran

Quarterly Journal of Applied Theories of Economics, 2023, vol. 10, issue 3, 137-172

Abstract: Uncertainty in the key variables of macroeconomics with disruptions in the decision-making of economic agents and distortions in the resource allocation mechanism is considered an important challenge for Iran's economy. Therefore, it is necessary to adopt appropriate policies to reduce uncertainty. So, the current research examines the effectiveness of monetary policy in reducing macroeconomic uncertainties during the period of 1989-2021. For this purpose, continuous wavelet transformation was used to discover the dynamics of the relationship between monetary policy and inflation uncertainty, economic growth uncertainty and foreign currency market uncertainty. The results show that the uncertainty of inflation only in the medium run and long run in the period of 1993-1997 has resulted in the aggressive reaction of the monetary policy. The monetary policy tool in Iran’s economy is not functioning effectively in reducing the uncertainty of the real sector. So that it cannot play a role in the medium and long run. The results show a strong relationship between uncertainty in the currency market and monetary policy instruments. So that in the long run, uncertainty in the foreign currency market leads to a greater growth of the monetary base.The mentioned process occurs due to the suppression of the exchange rate by the policy maker to anchor the Inflation expectations and gain credit. This procedure leads to the growth of monetary totals and the intensification of uncertainty in the foreign currency market, which results in the monetary policy becoming irrelevant. This article tries to provide useful information and policy suggestions by analyzing the relationship between variables in the time-frequency domain

Keywords: Monetary policy; Uncertainty; Irans economy (search for similar items in EconPapers)
JEL-codes: C49 E43 E52 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ecoj.tabrizu.ac.ir/article_17097_a1da459fa24c35c79f0e2e5ffefa4090.pdf Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:qjatoe:0318

Access Statistics for this article

Quarterly Journal of Applied Theories of Economics is currently edited by Sakineh Sojoodi

More articles in Quarterly Journal of Applied Theories of Economics from Faculty of Economics, Management and Business, University of Tabriz Contact information at EDIRC.
Bibliographic data for series maintained by Sakineh Sojoodi ().