Document Type : Article-Based Dissertations


1 PhD candidate, Department of Economics, University of Isfahan, Isfahan, Iran.

2 Associate Professor, Department of Economics, University of Isfahan,

3 Assistant Professor, Department of Economics, University of Isfahan,

4 Department of Management and Economics, Tarbiat Modares University, Tehran, Iran


The flow of funds account outlines the financial transaction and funds flow that occurs in different economic sectors and it can be used as a basic information tool in experimental research and to analyze the impact of monetary and financial policy shocks in this sector. A correct understanding of how the shock impacts the financial activities of these sectors can act as a useful guide toward determining suitable policies for impacting the other macroeconomic variables. In this research, the impact of monetary shock on asset changes and the financial liabilities of institutional sectors including households, non-financial enterprises and banks were examined. For this purpose, the data spanning 1972 to 2017 of the factor-augmented vector autoregressive (FAVAR) model was used. Results from the shock response functions show that contractionary monetary shock caused by the increased Legal reserve ratio has led to a decrease in the assets and financial liabilities belonging to households, non-financial firms and banks sectors. Net financial investment resulting from the difference between financial liabilities and financial assets increases for the banking sector and non-financial firms, indicating a greater reduction in liabilities than a decrease in financial assets. In the case of the household sector, net financial investment decreases due to a greater reduction in financial assets than a reduction in financial liabilities.


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