Evaluating the effects of monetary policy shocks on aggregate demand components in GCC countries: evidence from svar

In this research, for the first time effects of monetary policy shocks on aggregate demand components with a baseline of structural vector autoregressive (SVAR) models are evaluated in GCC countries. SVAR Results explain, when fix capital formation included in model, contemporaneous coefficients indicate that in most countries (except Kuwait) the interest rate responds positively to unexpected increase in monetary aggregate. The opposite side of the story is also true, broad money decreases with an unexpected increase in an interest rate. Furthermore, monetary policy interest rate (except Kuwait) especially between 1 to 4 years has the more effect on investment compare to other components of GDP in the case of GCC states. For GCC states, findings indicate that investment is the first while GDP is second component variable that are mostly affected by monetary policy shocks. Most effects of monetary policy on investment are seen in Saudi Arabia, Qatar, and Oman.