Effects of Monetary Policy on Industry sector Growth in Iran

The main objectives of macroeconomic policies, in general, and monetary policies, in particular, are price stability, economic growth and a favorable employment level. This article estimates the major determinants of monetary Policy and investigates how effects of monetary Policy have changed industry sector Growth in Iran. The theoretical framework is based on this assumption that the real output is inversely related to the interest rate but it is shifted by monetary policy. This study uses annual time series data (1961-2007) and unit root tests and analyze them using Auto Regressive Distributed Lag (ARDL) model by Pesaran et al. [1]. This co-integration technique accommodates potential structural breaks that could undermine the existence of a long-run relationship between monetary Policy and industry sector Growth and its main determinants.