Examining the Effect of Shocks in Monetary and Fiscal Policy on Value Added of Industry and Mining Sector in Iran

Industry is one of the important parts of the countrys economic that attention to it is the goals of developed and developing countries. In Iran, according to the Statistics, Industries and Mines sector has been allocated about 25 percent of GDP to itself. Despite this contribution, the industry during the implementation of development programs and policies of adjustment and stabilization has been effected from macro-economic policies, especially monetary and fiscal policies. With this approach, the present study has been investigated the effect of shocks in monetary and fiscal policy on value added of industry and mining sector in Iran during 1991-2013. To reach this goal, firstly the monetary and fiscal policy shocks was modeled in framework of Hodrick and Prescott filter. Then using the ARDL model, the effects of monetary and fiscal policy shocks on value added of industry and mining sector along with variables such as net capital stock of industries and mines, labor employed in this sector and the costs of education were examined. The results of this study showed that a positive shock of monetary and fiscal policy has a direct impact on the value added of industry sector; But the negative shock of monetary and fiscal policy, has a negative effect on the value added of the industry. The results also revealed that the capital stock and labor employed in industry and mining sector have a positive effect on the value added of this sector. Accordingly, it can be said that 10 percent increase in the capital stock and labor, increase the value-added of industry sector 7.3 and 5.6 percent in the long term, respectively. Finally, the results indicated that per capita government spending on education has also a positive impact on the value added of industry sector; So that 10 percent increase in per capita government spending, increase the value-added of industry sector 3.4 percent in the long term.