Identification of the Most Important Variables Affecting the Mechanism of Monetary Policy Transmission in the Iranian Economy with the Bayesian Model Averaging Approach

Many economists agree that monetary policy affects the real sector of the economy in the short term, but their disagreement is over the channels of influence and their relative importance. The research's main purpose was to identify the most important mechanism of monetary policy transmission in the Iranian economy with the Bayesian model averaging approach. Thirty-five variables affecting monetary policy transmission through the neoclassical channel and 22 variables affecting the monetary transmission mechanism in the non-neoclassical model were entered into the model. Finally, using the Bayesian averaging model approach, the most important variables affecting the monetary policy transmission mechanism were determined. According to the results, it can be said that the money transmission mechanism in the Iranian economy is transmission through both neoclassical and non-neoclassical channels. According to the results, the neoclassical channel has a higher share in the monetary mechanism transmission system than the non-neoclassical channel. According to the results, the most important channels of monetary policy transmission in the Iranian economy are the effective real exchange rate variables, free-market interest rate, informal exchange rate deviation from the formal, total stock index growth rate, land price index in Tehran, the volume of money, total debt to the banking system and the growth rate are credits granted to the private sector.