The Efficiency of Monetary Policies and Money Demand in Iran: An Asymmetric Analysis

An overview of the policies announced by the central bank in various cases indicates that the demand for money is one of the key concepts in the analysis of the Macroeconomic. According to the criteria of macroeconomics analysis, there are important features of money demand that can mainly affect the efficiency of monetary policy. One of the most important features of money demand is stability. Monetary policy refers to the adoption of measures to control and regulate the amount of money in circulation to achieve desirable economic goals.This study examines the efficiency of monetary policy and money demand in Iran. Data have been collected annually for the years 1990-2019. Hence, first, using the Nonlinear Auto-Regression Distribution (NARDL) model, the asymmetry of money demand with respect to changes in inflation has been investigated and proven. Then, using the Vector Auto-Regression (VAR) model, the effectiveness of monetary policy efficiency despite the asymmetry of money demand with respect to the positive and negative shocks of inflation has been studied and analyzed. The results show that positive and negative changes in inflation rate will change the money demand asymmetrically. Also, the effectiveness of monetary policy efficiency in relation to the asymmetry of money demand changes along with the positive and negative inflation rate.