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Information Journal Paper

Title

Monetary Policy and Exchange Rate Pass-Through Degree in Iran

Pages

  25-55

Abstract

 Investigating the effect of the exchange rate on economy and the responses of monetary policy to shocks under incomplete exchange-rate pass-through (ERPT) is one of the main issues in Iranian economy. The exchange rate has a significant effect on inflation and terms of trade, and it transfers the effects of different shocks through import prices and the consumer price index to the whole economy. The exchange rate has an absorber or amplifier effect on shocks, playing an important role in implementation of monetary policy. But the important thing is that the rate of absorbing or raising depends on the exchange rate pass-through. Therefore, the exchange rate pass-through is significant in terms of monetary policy performance. The present study first examines the incomplete exchange rate pass-through effect on Iran economy and its implication on monetary policy under the framework of a Dynamic Stochastic General Equilibrium model, and then it analyzes the effect of different degrees of pass-through under terms of trade and export productivity shocks on Iranian economy. The results indicate that terms of trade shock leads to increase in total product, none tradeable product and CPI inflation and it also decreases oil product. on the other hands, export productivity shock increases total product and oil product and decreases none tradeable product and CPI inflation. The analysis of the effect of different degrees of an Iran economy shows that: the higher degree passthrough decreases effect of exchange rate volatility on imported inflation and CPI inflation, and also in these conditions the effect of the monetary policy of the exchange rate channel on economic variables is reduced. In addition, the incomplete exchange rate pass-through will reduce the impact of shocks on the economy. In other words, the exchange rate with incomplete pass-through absorbs some of the effects of shocks.

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    • Cite

    APA: Copy

    Mashhadizadeh, F., PIRAEE, KH., Akbari Moghaddam, B., & ZARE, H.. (2019). Monetary Policy and Exchange Rate Pass-Through Degree in Iran. JOURNAL OF APPLIED ECONOMICS STUDIES IN IRAN, 8(30 ), 25-55. SID. https://sid.ir/paper/391539/en

    Vancouver: Copy

    Mashhadizadeh F., PIRAEE KH., Akbari Moghaddam B., ZARE H.. Monetary Policy and Exchange Rate Pass-Through Degree in Iran. JOURNAL OF APPLIED ECONOMICS STUDIES IN IRAN[Internet]. 2019;8(30 ):25-55. Available from: https://sid.ir/paper/391539/en

    IEEE: Copy

    F. Mashhadizadeh, KH. PIRAEE, B. Akbari Moghaddam, and H. ZARE, “Monetary Policy and Exchange Rate Pass-Through Degree in Iran,” JOURNAL OF APPLIED ECONOMICS STUDIES IN IRAN, vol. 8, no. 30 , pp. 25–55, 2019, [Online]. Available: https://sid.ir/paper/391539/en

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