Monetary policy efficiency under economic uncertainty (Research in Iranian Economy)

In the present study, the effect of economic uncertainty on the efficiency of monetary policy has been investigated using data from the first quarter of 1989 to the fourth quarter of 1396. For the purpose of the present study, first, we determine the optimal economic uncertainty index by using SOS search algorithm. After determining the optimal economic uncertainty index, using the Interaction Vector Autoregressive (IVAR) approach to calculate the impulse response functions (IRFs) of inflation and production variables to the shock of M_1 variable under high and low uncertainty levels. The results show that under different levels of uncertainty, the variable response of production and inflation to the shock of the M_1 variable is different, so that the response of production variable under low uncertainty is higher than the high uncertainty level, while the variable response Inflation is reversed, meaning that the response to this shock, under high uncertainty is higher than the low uncertainty level.