Akbar Komijani, Farhad Alinejad-Mehrabani,
Volume 17, Issue 2 (8-2012)
Abstract
In the area of monetary and credit policy-making, the policy-makers should take into special consideration the interactions of monetary policy tool with ‘assets market’ and ‘money market’ while analyzing the relationship of the both with macroeconomic variables such as real production and inflation in a higher level. It is a must to get familiar with the mentioned matters in an attempt to efficiently identify and implement the right policies. A helpful way to study and realize the monetary policy is to focus on monetary transmission mechanisms, through which the activities of the central bank would take effect. Transmission mechanisms of monetary policy are implemented via different routes while influencing various variables and markets with different speeds and intensities. This article tries to evaluate the effectiveness power of four main monetary transmission channels i.e., 1) interest, 2) foreign exchange, 3) assets (stock) price, and 4) bank loaning, on real production growth rate and inflation rate by means of seasonal data within 1: 1990 – 2: 2008. According to the findings of the research, all four channels were powerful enough to transmit the monetary activities to the production and inflation growth rates in other words, these four channels are regarded as active channels. Moreover, monetary policies exert the highest effect on real production growth through bank loaning channel. Meanwhile, monetary policy is most effective on inflation rate via foreign exchange channel.
