Volume 9, Issue 34 (12-2018)
jemr 2018, 9(34): 71-105 |
Back to browse issues page
Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
Heydari H. Constructing a Factor Augmented VAR Model to Analyze Transmission of Oil and Monetary Shocks to Iranian Economy. jemr 2018; 9 (34) :71-105
URL: http://jemr.khu.ac.ir/article-1-1596-en.html
URL: http://jemr.khu.ac.ir/article-1-1596-en.html
Tarbiat Modares University , hassanheydari78@gmail.com
Abstract: (5565 Views)
There is a growing attention to models which contain a broader set of economic data. In recent decade, introduction of Factor Augmented VAR models through augmentation of traditional VAR models with unobservable “factors” has made a new route to econometric modeling. In spite of the growing number of international papers and researches which have used FAVAR approach to modeling policy shocks to various economies, there is little about Iranian economy. So the paper is an attempt to fill the gap in the literature using an FAVAR model to analyze transmission of oil and monetary shocks to Iranian economy. The model contains 35 major macroeconomic annual variables spanning from 1974 to 2014. The results show that “real sector” of Iranian economy responds positively to oil shocks up to 5 years. Also “nominal sector” of the economy responds positively to oil shocks but the responses are shorter, smaller and more volatile than “real sector” responses. Finally the model results show responses of “nominal sector” of Iranian economy to monetary shocks are positive which its duration varies between 2 and 4 years.
Type of Study: Applicable |
Subject:
پولی و مالی
Received: 2017/08/25 | Accepted: 2019/01/17 | Published: 2019/02/25
Received: 2017/08/25 | Accepted: 2019/01/17 | Published: 2019/02/25
References
1. Bai, J. and Ng, S. (2002), "Determining the Number of Factors in Approximate Factor Models". Econometrica, (70) 1, 191-221. [DOI:10.1111/1468-0262.00273]
2. Bernanke, B. and Blinder, A. (1992). "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, (82) 4, 901-921.
3. Bernanke, B. S. & Boivin, J. (2003). "Monetary policy in a data-rich environment," Journal of Monetary Economics, (50) 3, 525-546. [DOI:10.1016/S0304-3932(03)00024-2]
4. Bernanke, B., Boivin, J. and Eliasz, P. (2004). "Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach," NBER Working Papers 10220, National Bureau of Economic Research, Inc. [DOI:10.3386/w10220]
5. Boivin, J., Michael, K., and Mishkin, F. (2010). "How Has the Monetary Transmission Mechanism Evolved Over Time?," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, (3), chapter 8, 369-422 Elsevier. [DOI:10.1016/B978-0-444-53238-1.00008-9]
6. Dave, C. Dressler, S. J. and Zhang, L. (2009), "The Bank Lending Channel: a FAVAR Analysis", Villanova School of Business and Economics, Working Paper No. 4.
7. Doz, C., Giannone, D. and Reichlin, L. (2006), "A Quasi Maximum Likelihood Approach for Large Approximate Dynamic Factor Models". Working Paper 674, September, European Central Bank.
8. Doz, C., Giannone, D. and Reichlin, L. (2007), "A Two-Step Estimator for Large Approximate Dynamic Factor Models based on Kalman Filtering". Discussion Paper 6043, January, CEPR.
9. Forni, M., Hallin, M., Lippi, M. and Reichlin, L. (2000), "The Generalized Dynamic Factor Model: Identification and Estimation". The Review of Economics and Statistics, (82) 4, 540-554. [DOI:10.1162/003465300559037]
10. Forni, M., Hallin, M., Lippi, M. and Reichlin, L. (2004), "The Generalized Dynamic Factor Model, Consistency and Convergence Rates". Journal of Econometrics, (119) 2, 231-255. [DOI:10.1016/S0304-4076(03)00196-9]
11. Forni, M., Hallin, M., Lippi, M. and Reichlin, L. (2005), "The Generalized Dynamic Factor Model, One Sided Estimation and Forecasting". Journal of the American Statistical Association, (100), 830-840. [DOI:10.1198/016214504000002050]
12. Geweke, J. (1977), "The Dynamic Factor Analysis of Economic Time Series". In: Aigner, D. and Goldberger, A. (Eds.), Latent Variables in Socio-Economic Models, Amsterdam: North-Holland
13. He, Q. Leung, PH. and Chong, TTL. (2013), "Factor-augmented VAR analysis of the monetary policy in China", China Economic Review, (25), June 2013, 88-104. [DOI:10.1016/j.chieco.2013.03.001]
14. Heydari, H. (2012), "The Effects of Monetary Shocks on the Price Level and Economic Activities in Iranian Housing Sector: a Factor-Augmented Vector Autoregressive (FAVAR) Analysis", Journal of Economic Modeling Research, 6: 129-153.
15. Huh, H. Kim, D. Kim, W. J. and Park, C. Y. (2014), "A Factor-Augmented Vector Autoregression Analysis of Business Cycle Synchronization in East Asia and Implications for a Regional Currency :::union:::", Asian Development Bank Working Paper Series, No. 385. [DOI:10.2139/ssrn.2479200]
16. Khezri, M.; Sahabi, B.; Yavari, K. Heydari, H.; (2015), "Speculation Effects on Inflation in Iran Economy: TVP-FAVAR Model", Economics Research 15 (57): 193-228.
17. Kilic, E. and Cankaya, S. (2015), "Consumer Confidence and Economic Activity: A Factor Augmented VAR Approach", Available at SSRN: https://ssrn.com/abstract=2668785 or http://dx.doi.org/10.2139/ssrn.2668785 [DOI:10.2139/ssrn.2668785]
18. Killian, L. and Lutkepohl, H. (2017)," Structural Vector Autoregressive Analysis", Cambridge University Press. [DOI:10.1017/9781108164818]
19. Liu, P. Mumtaz, H. and Theophilopoulou A. (2014), "The transmission of international shocks to the UK. Estimates based on a time-varying factor augmented VAR", Journal of International Money and Finance, (46), 1-15 [DOI:10.1016/j.jimonfin.2014.03.004]
20. Marzban, H,; Dehghan, Z.; Akbarian, R., (2018), "The theory of Measuring Effects of Interest rate shock on the Macro factors in Iran: A Factor-Augmented Vector Autoregressive, Approach", Quarterly Journal of Applied Economic Studies in Iran, (AESI), 7(25): 29-54.
21. Marzban, H,; Dehghan, Z.; Akbarian, R., Farahani, M.; (2016), "Assessing the effectiveness of monetary policy on the economy: FAVAR approach", Quarterly Journal of Quantitative Economics, 13(2): 71-92.
22. Moench, M. (2008), "Forecasting the yield curve in a data-rich environment: A no arbitrage factor-augmented VAR approach", Journal of Econometrics, (146), 1, 26-43 [DOI:10.1016/j.jeconom.2008.06.002]
23. Rosoiu, A. (2015), "Monetary Policy and Factor-Augmented VAR Model", Procedia Economics and Finance, (32), 400-407. [DOI:10.1016/S2212-5671(15)01410-0]
24. Sargent, T. and Sims, C. (1977), "Business Cycle Modelling without pretending to have too much a-priori Economic Theory". In: Sims (Ed.), New Methods in Business Cycles Research. Minneapolis: Federal Reserve Bank of Minneapolis.
25. Sims, C. (1992), "Interpreting the Macroeconomic Time Series Facts: The Effects of Monetary Policy", Cowles Foundation Discussion Paper No. 1011.
26. Soares, R. (2013), "Assessing monetary policy in the euro area: a factor-augmented VAR approach", Applied Economics, (45), 19, 2724-2744. [DOI:10.1080/00036846.2012.676736]
27. Stock, J. and Watson, M. (1998), "Diffusion Indexes". Working Paper 6702, August, NBER. [DOI:10.3386/w6702]
28. Stock, J. and Watson, M. (1999), "Forecasting Inflation". Journal of Monetary Economics, (44) 2, 293-335. [DOI:10.1016/S0304-3932(99)00027-6]
29. Stock, J. and Watson, M. (2002a), "Forecasting using Principal Components from a Large Number of Predictors". Journal of the American Statistical Association, (97), 1167-1179. [DOI:10.1198/016214502388618960]
30. Stock, J. and Watson, M. (2002b), "Macroeconomic Forecasting using Diffusion Indexes". Journal of Business and Economic Statistics, (20) 2, 147-162. [DOI:10.1198/073500102317351921]
31. Stock, J. and Watson, M. (2005), "Implications of Dynamic Factor Models for VAR Analysis". Working Paper 11467, June, NBER. [DOI:10.3386/w11467]
32. Stock, J. H. and Watson, M. W. (2005) "Implications of Dynamic Factor Models for VAR Analysis", NBER Working Paper No. 11467. [DOI:10.3386/w11467]
Send email to the article author
| Rights and permissions | |
 | This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. |
