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The role of Exchange Rate in the Effect of Money on Economic Growth and Inflation: TVP-VAR Approach
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Hossein Asgharpour *   , Saman Hatamerad , Elham Nobahar , Bahram Adrangi , Mansour Heydari |
| University of Tabriz , asgharpurh@gmail.com |
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Abstract: (109 Views) |
| According to the economic literature, the exchange rate is one of the important channels of money transfer, so that changes in the exchange rate play an important role in creating the competitiveness and uncertainty of the economy. This can put monetary policy changes on inflation and production growth under different conditions in different conditions. In this regard, this article has investigated the role of exchange rate in the effect of money on inflation and gross domestic product growth by using the seasonal time series data of 1370-1400 and using the time-varying auto-correlation parameter method (TVP-VAR). The results of this study show that the lower the variance of the exchange rate growth, the more effective the monetary policy is in curbing inflation. On the other hand, if the average growth of the exchange rate is close to the growth of the monetary base, then the monetary policy will increase production. Also, if the exchange rate grows more than the monetary base, inflation increases and GDP growth decreases. The results of this research confirm that the growth of the monetary base more than the economic capacity leads to an increase in inflation and a decrease in production growth, and this inflationary process leads to an increase in the exchange rate. In such a structure of the economy, where high money printing is a prominent feature, the suppression of the exchange rate provides the basis for increasing the currency jump, and the currency jump is an important factor in strengthening the recessionary inflation in the economy. Therefore, the policy recommendation of the present study is to reduce the growth of the monetary base and not to manipulate the exchange rate |
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| Keywords: Exchange rate, monetary base, inflation, production, TVP-VAR |
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Full-Text [PDF 973 kb]
(55 Downloads)
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Type of Study: Research |
Subject:
Special
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