The Asymmetric Effect of the Exchange Rate and the Amount of Money on the Subsections of Industry in Iran by Using Markov - Switching Approach

Abstract

According to the importance of the industrial sector in the economy of Iran, the development of this sector is essential to the country's economic development. This study aimed to investigate and compare the asymmetric effect of the exchange rate and the amount of money on industrial subsections of Iran by using Markov - switching approach during the 1972-2012. In this regard, the exchange rate and monetary shocks were initially calculated through Var pattern. Then, the effect of exchange rate and monetary shocks on selected industrial subsections of Iran was studied by using Markov-switching model. Estimation results show that the exchange rate and monetary shocks have negative effect on A subsection and positive effect on B subsection.