بررسی علیت و سرریز نوسانات بین نرخ ارز، تورم و نقدینگی در اقتصاد ایران: رویکرد TVP-VAR-BK

Volatility Causality and Spillovers between Exchange Rate, Inflation, and Liquidity in the Iranian Economy: A TVP VAR BK Approach

Soheil Roudari, Seyed Hadi Arabi and Sanaz Rahimi Kahkashi

MPRA Paper from University Library of Munich, Germany

Abstract: Today, any fluctuation in one sector quickly transmits to other sectors of the economy. The aim of this study is to examine the transmission and reception of shocks, as well as the causal relationship of volatility spillovers, with attention to the time scale at which fluctuations occur among liquidity, the exchange rate, and inflation in Iran over the period 1982:03 to 2022:09 (1361:01–1401:07), using monthly data and a Time Varying Parameter Vector Autoregressive model with frequency domain spillover measures (TVP VAR BK). The findings indicate that most connections among the examined variables occur in the long run, with the exchange rate being the dominant factor in explaining volatility within the network. In the short run, liquidity acts as a net transmitter of volatility to inflation and the exchange rate, while in the medium and long run, the exchange rate becomes the net transmitter of volatility, and both inflation and liquidity serve as net receivers of exchange rate fluctuations. Moreover, the net impact of the exchange rate strengthens considerably in the long term. In practice, if exchange rate volatility is not controlled, it can transmit fluctuations to liquidity and, consequently, fuel inflationary instability—highlighting the critical role of exchange rate stability in managing liquidity and inflation dynamics.

Keywords: Exchange rate; inflation; liquidity; TVP VAR BK model (search for similar items in EconPapers)
JEL-codes: G01 G17 G32 (search for similar items in EconPapers)
Date: 2023-06-28, Revised 2024-02-20
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Published in Iranian Journal of Economic Research 97.28(2024): pp. 152-190

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