An Analysis About the Effects of Expansionary Monetary Policy Shocks on the Flow of Funds Account in Iran

Document Type : Research Paper

Authors

1 Department of Economics, Faculty of Administrative Sciences and Economics, University of Isfahan, Isfahan, Iran

2 Department of Economics, Faculty of Administrative Sciences and Economics, University of Isfahan,, Isfahan, Iran

3 Department of Economics, Faculty of Management and Economics, Tarbiat Modares University , Tehran, Iran

Abstract

The financial crisis of 2008 has highlighted the need to comprehend the financial interrelationships among the various economic sectors as well as between those sectors and the outside world. This study has analyzed how changes in financial assets and liabilities as well as net financial investments by household institutional sectors, non-financial firms, banks, government and foreign sector affect expansionary monetary shocks. In this regard, an accurate analyzing could provide helpful guidance in making the appropriate policies for influencing macroeconomic variables. For this purpose, a FAVAR model was employed using data from 1973-2019. It was concluded that expansionary monetary shocks increased both the acquisition of new financial assets and the issuance of new liabilities of various national economic sectors. Meanwhile, the banks were net borrowers from other economic sectors and other sectors - except the non-financial firms and the government that response with a delay– were net lenders in the first year. However, all national economic sectors turned into lenders and the foreign sector had become the borrower after the first year is passed. The reason for this appears to be the difference between domestic rate of return and foreign interest rate. Along with net capital outflow occurs for two years significantly

Keywords

Main Subjects

References

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https://doi.org/10.1080/00036846.2019.1584371

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Journal of Economic Research (Tahghighat- E- Eghtesadi)
Volume 58, Issue 3 - Serial Number 144
December 2023
Pages 487-528

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History

  • Receive Date: 09 May 2023
  • Revise Date: 08 October 2023
  • Accept Date: 19 September 2023

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