Nonlinear Analysis of the Relationship between Macroeconomic Variables and Monetary Policy with the Ball and Mankiw List Cost Model (TVP-VAR approach in Iranian economy)

Document Type : Research Paper

Authors

1 Islamic Azad university Yazd

2 islamic azad university Yazd

3 yazd eslamic azad university

Abstract

In the present study, a nonlinear analysis of the relationship between macroeconomic variables and monetary policy with the Menu Cost and Mankiw Model in the Iranian economy using the time-regression vector variable coefficient (TVP-VAR) based on the frequency of quarterly data during the period 1368- 1397 was paid. According to the estimation results; it was found that there was a non-linear correlation between macroeconomic variables such as inflation, oil prices and GDP with the monetary policy index. The results show that the impact of oil price shocks on GDP is positive, which can be attributed to the increase in capital goods due to increased oil revenues, which has led to an increase in production in the short run. The effect of oil price shock on inflation has a negative effect on the third period due to the reaction function, which can be attributed to the increase in imports of goods due to increased oil revenues, which disappears from the third period onwards. The effect of monetary shocks on GDP can also be considered positive in a very short period of time, but as the corresponding reaction function shows, it has no effect on production in the long run. The effect of monetary shocks on inflation is also positive, so the assumption of inflation monetary relationship is not rejected.

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References

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