Transmission and Impact of the Global Monetary Policy Uncertainty Index and Shocks from Major World Economies on Iran Using the Mixed-Frequency VAR Method

Abstract

This study examines the transmission and impact of the Global Monetary Policy Uncertainty (MPU) Index and economic shocks in major world economies (the United States, the Eurozone, and China) on Iran’s economic growth during the period 1995–2023. To gain a better understanding of intertemporal interactions, the Mixed-Frequency Vector Autoregressive (MF-VAR) model is employed, which enables the integration of datasets with different frequencies (annual and quarterly). In this study, the Global Trade Volatility Index and the Global Monetary Policy Uncertainty Index are used in annual form, while the GDP growth rates of the Eurozone, the United States, and China are measured as quarterly percentage changes. The empirical results indicate that Iran’s annual growth is significantly affected by quarterly economic growth shocks in major world economies. Economic shocks from the United States have had the strongest impact on Iran’s growth, whereas in the Eurozone, a similar but weaker pattern is observed. In the case of China, a distinct impact pattern emerges, reflecting the country’s specific economic structure and seasonal fluctuations. Among quarterly shocks, China’s first-quarter GDP growth impulse generated a positive reaction of 0.4 percentage points in Iran’s economic growth, though this effect declines in subsequent periods. In contrast, annual shocks from the Global Trade Volatility Index and the Global Monetary Policy Uncertainty Index exerted only minimal influence on Iran’s economic growth. The findings of this research underscore the importance of considering quarterly economic interactions and the structure of global markets in formulating Iran’s domestic economic policies.