Investigating the Impact of Exchange Rate Uncertainty on Inflation and Interest Rate Uncertainty and the Role Monetary and Fiscal Policy Credibility on it: Application of BEKK-VECH-VAR Methods

Shalyari, Farzaneh; Arman, Seyyed Aziz; Salahmanesh, Ahmad

doi:10.22084/aes.2022.25294.3372

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	Investigating the Impact of Exchange Rate Uncertainty on Inflation and Interest Rate Uncertainty and the Role Monetary and Fiscal Policy Credibility on it: Application of BEKK-VECH-VAR Methods
فصلنامه مطالعات اقتصادی کاربردی ایران
Volume 11, Issue 43, December 2022, Pages 9-37 PDF (1.38 M)
Document Type: Research Article
DOI: 10.22084/aes.2022.25294.3372
Authors
Farzaneh Shalyari¹; Seyyed Aziz Arman^* ²; Ahmad Salahmanesh³
¹PhD student in Economics, Department of Economics, Faculty of Economics, Shahid Chamran University, Ahvaz, Iran
²Professor, Department of Economics, Faculty of Economics, Shahid Chamran University, Ahvaz, Iran
³Assistant Professor, Department of Economics, Faculty of Economics, Shahid Chamran University, Ahvaz, Iran
Abstract
Take a look at the trend of macroeconomic variables such as exchange rate and inflation in Iran, shows that these variables have had a relatively Instable trend in recent years. However, the effects of the uncertainty of these variables and their interactions have received very little attention in the country. Therefore, this study investigating the impact of exchange rate uncertainty on inflation and interest rate uncertainty and the role monetary and fiscal policy credibility on it using quarterly data during the period 1991-2019. For this purpose, initially using the three-variable VECH and BEKK methods, uncertainty in the variables is estimated. The results show that BEKK method is more suitable for estimating uncertainty than VECH method. Then using the VAR structure, Investigating the Impact of Exchange Rate Uncertainty on Inflation and Interest Rate Uncertainty and the Role Monetary and fiscal policy credibility on it. The results show that exchange rate uncertainty and inflation rate uncertainty affect each other. Also, exchange rate uncertainty and interest rate uncertainty intensify each other. Rising interest rates increase interest rate uncertainty and rising inflation increases inflation uncertainty. This result means the confirmation of the Friedman-Ball hypothesis and the rejection of the Pourgerami and Maskus hypothesis. The results also show that the credit of monetary and fiscal policies reduces the effect of exchange rate uncertainty on interest rate uncertainty and inflation.
Keywords
Exchange Rate Uncertainty; Inflation Rate Uncertainty; Interest Rate Uncertainty; Monetary and Fiscal Policy Credibility

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Investigating the Impact of Exchange Rate Uncertainty on Inflation and Interest Rate Uncertainty and the Role Monetary and Fiscal Policy Credibility on it: Application of BEKK-VECH-VAR Methods

- تجلی، آیت‎اله، (1389). «آثار کاهش نرخ سود بانکی بر تورم، اشتغال و سرمایه‎گذاری». مرکز پژوهش‎های مجلس شورای اسلامی. چاپ اول.

- تقی‌نژاد عمران، وحید؛ احسانی، محمدعلی؛ و رضایی، محسن، (1397). «ارزیابی اعتبار سیاست پولی ایران». پژوهشنامه اقتصاد کلان، 13(25): 63-39. .doi: 10.22080/iejm.2018.2033