Uncertainty in Monetary Policy and its Economic Impacts: a combination of VAR and GARCH

Various studies emphasize the importance of transparency of the central bank. However, since the central banks has the main task of stabilizing inflation and unemployment rate in normal level, so they have some of their policies in such a way that remain hidden from view of economic agents. This increases the uncertainty in monetary policy, which in turn can affect economic growth, inflation and unemployment. In this study, using quarterly data for the years 1372-90, the economic effects of uncertainty in monetary policy will be studied on economic growth, inflation and unemployment rates in Iran. The results suggest that the increase of uncertainty in monetary policy will be followed by increasing volatility in economic variables.