Investigating the Impact of Monetary Policy Shocks on Economic Growth and Inflation in the Iranian Economy: Empirical Evidence Based on the TVP-TVP-SFAVAR-SV Model

In this paper, the auto-regression vector model factor-augmented with random fluctuations and time-varying parameters  to investigate monetary policy shocks and consider the fiscal policy variable as an unobservable variable on inflation and economic growth has been discussed. In this regard, seasonal time series data of 6 macroeconomic variables of Iran during the period 1990:2 to 2018:3 have been used. To evaluate monetary policies, from the four basic monetary variables, liquidity, banks' debt to the central bank, and non-governmental sector's debt to the banking system, as a monetary instrument and fiscal policy variable (fiscal policy variable government's construction and current expenditures, oil revenues, tax and other incomes) has been used.The results indicate that, except for the variable shocks of the debt of the non-governmental sector to the banking system, the shocks of other variables (both monetary policy variables and the hidden variable of fiscal policy) have a negative effect on economic growth and the other hand, increase inflation. The variable shocks of non-governmental sector debt to the banking system also had a positive and decreasing effect on economic growth, while it had an increasingly positive effect on inflation. According to the results, it can be stated that the dependence of Iran's economy on oil revenues and monetary policies derived from it; Also, due to the structural weaknesses in the absorption of liquidity by the country's productive sector and the move towards speculative activities, it is among the factors that have caused inflation and the decline of economic growth