The Test of Trade Balance Effect Symmetry and the Incidence of Effects of Monetary Policy on Output and Inflation

The economy of Iran, since 1385s In addition to significiant decrease in output has experienced the high and two-digit inflation rates. For this reason, review of determinantes of inflation rate and output has a remarkable necessity. The factors like population growth, Eccessive technological advancement, private investment and initial level of per capita income and money growth are the variables affecting on the growth. Also, the idea of “inflationary money” has the relative consensus among economists, but identifying of the factors that determine the intensity of the effectiveness of the monetary policy on inflation rate and output makes it possible for monetary policymakers to planning for controlling inflation and increasing the output. Trade Openness is one of the factors that has a determinative role in review of difference the effectiveness of money growth on inflation rate and output in different countries. The aim of the present study is the test of Trade balance effect symmetry and the Incidence of the effects of monetary policy on economic growth and inflation. For this purpose, years 2000-2014, related to 34 selected countries with high middle-income and Generalized Method of Moments (GMM) have been used. The research showed that more trade openness leads to increase the impact of monetary policy on output and decease the impact of monetary policy on inflation.the more trade liberalization through omitting or decreasing of tarrifs and import quotas are the main suggestions of this study