Monetary Shocks Effects on Different Economic Sectors: Using the FAVAR Approach

According to economic conditions, the central bank in monetary policy decisions considered not only information over the economy but also the situation various economic sectors. The purpose of this article is to examine the impact of various economic sectors of a monetary shock on the economy of Iran. Therefore this connection has been reviewed by using the Factor-Augmented VAR (FAVAR) with 215 data variables, during the period 1990:02 to 2017:01. The results suggest that the added value of different sectors show different responses facing a monetary shock. In a way that So that the service group has a higher sensitivity to monetary shocks than the mining and agricultural sector and the oil sector does not show a significant response to monetary shocks. According to the different impact of different economic sectors, central banks and monetary authorities should consider all sectors reaction when the monetary policy actions, in order to be more precise in planning the national economy.