Journal of Economic Modeling Research

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A Dynamic Stochastic General Equilibrium (DSGE) Model is developed to study monetary business cycles impacts of volatilities of oil revenue and money supply on macroeconomic variables in Iran. The results show that 0.15 percent deviation from the trend of steady state inflation is explained by changes in oil revenue when it is accompanied by change in money aggregates. However, if such changes in oil revenues are not financed by the central bank, inflation deviates only by 0.1 percent. The results reemphasize the fact that money is neutral in a non-sticky price framework and only affect output and employment by 0.05 and -0.01 percent respectively.

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This study tries to examine the way housing residential investment in Iran's urban area is influenced by the shocks of oil revenues, and for that, time series data spanning the period 1991:1-2007:4 are deployed in a Dynamic Stochastic General Equilibrium (DSGE) model including households, firms producing new residential houses, and the production of other economic firms as well as oil sector. The model is based on some simplify assumptions suitable to Iran's economy characteristics as: Iran as a small economy regarding capital flows, Oil Exports and goods imports and no price stickiness in housing sector. Moreover, the allocation of resources in the economy is determined by a central planning. The Model's solution and simulation is processed through using DYNARE as a subset of MATLAB software package. The results showed that the incidence of extreme volatility in the short ‌ behavior of housing residential investment in Iran's urban area, due to shocks of oil revenues, shocks was not Persistent and quickly disappeared. This implies that Iran's economy is suffering from Dutch Disease.

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One of the important targets of the economic planning is economic growth via enhancement of the labor productivity. In this regard, education expenditures play a crucial role. This study aims at investigating the effect of education expenditures on the level of human capital and economic growth through a computable general equilibrium approach. The data on economic variables and social accounting matrix belongs to the year 2001. Three scenarios on education expenditures are defined and their effect on human capital and economic growth are estimated. The results show that education expenditures have positive effects on economic growth and human capital. A 50% increase in education expenditures in the first period causes 3.81 and 5.8 percent increase in human capital and economic growth respectively. In the second period, the same increase in education expenditures affects human capital and economic growth positively by 5.4 and 7.3 percent respectively. Although separating the economic growth into human and physical factors in the first period shows that there is no relationship between human capital and economic growth, but in second period this separation causes a relationship between the two factors.

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  The allocation of opportunities affects income distribution and income inequality. This paper analyzes the economic impacts of initial allocation of resources and redistribution of opportunities. In this study, we apply a computable general equilibrium (CGE) model focusing on distribution of opportunities and allocation of available resources. The differences between households' income are caused by differences in labor income (skilled and unskilled) and the household's income from capital stock. The model is calibrated based on micro consistent matrix (MCM) of Iranian economy. We found that, the redistribution of opportunities and re-allocation of resources can reduce inequality. In other words, improvement in equality of opportunities leads to more equal society. The important finding of the study is that an increase in inequality of opportunity may cause the income gap grows faster. So, big reduction in inequality of income after small reduction in inequality of opportunities can be witnessed.

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  Oil revenues play a significant role in the government budget in Iran and have also an important impact on GDP. This study aims at providing a practical solution for the question of how oil revenues should be managed. In this regard, a Computable General Equilibrium (CGE) model has developed to examine the direct effect of distribution of oil revenues on GDP in both static and dynamic approaches .

  The results of static model show that the direct distribution of oil revenues to households has a negative effect on the government expenditures and therefore decrease the GDP . The dynamic model allows the conversion of savings into investment and capital formation. So the results of running this model show the positive effect of direct distribution of oil revenues on GDP and also the negative effect of this policy on the government current spending. Therefore, the results confirm that direct distribution of oil revenues is an effective policy in reducing the dependence of government on oil revenues and also in relying more on people and the tax revenues .

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The purpose of this paper is to introduce the “Natural Resources Perpetuity Rule” in the allocation of resources revenue. We also analyzed the potential impacts of implementing this rule on oil and gas revenues in Iran. To do so, we employed a Computable General Equilibrium Model which is calibrated based on 2010 Micro Consistent Matrix. We assumed an open economy with different sectors such as oil and gas, public services and other activities. Assuming exhaustibility, we measure the impact of different saving rates from Resources Revenue (SR) on welfare, size of public sector, activity levels and exports. We found that the more the SR, the more the welfare loss in first years, the higher the long-run welfare path, the more the non-oil export and the less the size of public sector.

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Energy carrier’s subsidization has placed a significant pressure on government budget in Iran thus, energy price increase is performed in order to ameliorate this case. One of the main challenges that policymakers need to consider is the impact of energy prices increase on the labor market especially, when the national unemployment rate is high. This paper utilizes a computable general equilibrium model based on a Micro Consistent Matrix for 2006 in order to evaluate the impact of energy price increase on the Iranian labor market during 2006. The empirical results are based on two scenarios: Baseline and FOB price increase scenarios. They show that the activity level and demand for labor in “crude oil, natural gas, and coal” as well as “other services” sectors will increase in short-run while the energy carriers’ prices increase. However, in long-run, the labor increment will be lower. Furthermore, the model results indicate that in short-run, the activity level and demand for labor in the other sectors will decrease. On the other hand, the policy will result in a larger decrement in the activity level and demand for labor in these sectors in long-run.

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Productivity is one of the important factors in exploration, extraction and production of oil and gas. On the other hands, the literature indicates that the process of economic liberalization is an inventible matter and globalization gradually is improving. So it is important that the effect of oil shocks is considered In Iran. Based on International trade statistics, Shanghai’s countries is one of the most important trading partners of Iran. Therefore, this study investigates whether or not the extraction, exploration and production of oil and gas in Iran is affected by productivity shocks in industry sector of Shanghai’s countries. The Computing general equilibrium approach is used for investigating the effect of productivity shocks on four sectors in Iran (including industry, agriculture, services and oil sectors). Social Accounting Matrix Adjusted 2004 is considered for three scenarios including 3, 5 and 7 percent of productivity shocks (based on world economy trend). The results indicate that the increase in productivity in three industry sector scenarios of Shanghai’s countries declines the oil and gas extraction in these countries, representing efficient use of existing resources and superior technology in other industries as well as focus on oil and gas imports from other countries. So, productivity scenarios indicate that increase in the industrial sector productivity of Shanghai’s countries causes increase in oil and gas extraction in Iran. In addition to showing the relationship between economic of Iran and economic situation of Shanghai’s countries, this issue explains the process of economic globalization.

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Hybrid sticky price model is one of  the main models, used to analyze the Persistencyand inertia in inflation. In recent years, Mankiw and Reis (2002),s sticky information model, has also been considered by many economic analysts. So, in present paper, we try to investigate and compare these models by using a Dynamic Stochastic General Equilibrium (DSGE) framework, based on new Keynesian structure. For this purpose, the data 1370:1-1391:4 Iran's economy has been used. The results of the estimated coefficient of inflation inertia indicate, inflation inertia in the model of hybrid price stickiness is more than information stickiness model. Inflation Persistency analysis is based on comparing the autocorrelation function of the original data and simulated data, show that hybrid price stickiness is better thaninformation stickiness model shows inflation persistence.It seems to be a hybrid price stickiness model more consistent with the economy of Iran and economic policy makers can be more confident of the results of this model to use them.

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Many countries all over the world will see widespread demographic changes in the decades to come. The demographic change will affect the economy and the labor market of these countries. In this paper we employ a multi-sector computable general equilibrium model to study the impacts of demographic change on the welfare, employment and activity level of economic sectors in Iran. The model includes seven economic sector and two types of labor-skilled and unskilled. We also considere the choice between leisure and work and labor mobility in the model. The model is calibrated based on the 2001 Micro consistent matrix. Results demonstrate that in the youth period, employment and activity level of sectors will increase. Furthermore, the increase in activity level will lead to an increase in income and welfare. When the population ages, on the other hand, welfare, employment and activity level of sectors will diminish.
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Targeted subsidies plan affects income distribution and poverty through several channels. On most of the analyzies, changes on labor supply are not considered. Increasing nominal income alone after paying cash subsidy rule can reduce labor supply in targeted subsidies. This issue may decrease effect of targeted subsidies. In this research by CGE we calculate the result of impact of energy price increase and direct cash subsidy transfer with considering labor supply decrease in the first phase of this plan. Then we use this CGE data to calculate the poverty index and income distribution. The model is calibrated based on 2001 Micro Consistent Matrix (MCM) designed by Research Institute of Planning and Management Deputy Strategic Planning and Control. The results of the model show that while the plan reduce supply of labor, it improve income distribution and poverty in Iran. The results also reveal that the percentage of improvement in purchasing power of rural deciles is more than the percentage of improvement in purchasing power of urban deciles.

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In this study, using Dynamic Stochastic General Equilibrium Model (DSGE model) the hypothesis of asymmetry of monetary shocks in the Iranian business cycle during the period of 1979-2012 is tested on macroeconomic variables. The designed model broadens the analytical framework of dynamic equilibrium models with respect to the economic characteristics of an oil-exporting country. To extract business cycles, the Hodrick-Prescott filtering process has been used. The results of the research indicate that the effects of positive and negative monetary shocks during ascendancy and economic prosperity are asymmetric, so that the effect of positive shock during the recession period in the Iranian economy during the studied period was stronger than the negative shock level. On the other hand, the results show that the effect of positive shocks during the boom period in the Iranian economy on the price level changes its size in proportion to the size of the shock; however, the effect of negative shocks during the boom on the level of prices initially reduced inflation and then after a short time Inflation increases again. Therefore, it can be stated that in the economy of Iran both inflation and economic boom will increase. In the case of production and investment, this asymmetry is in a way that results in a broader expansionary policy in a recession and, in economic prosperity, the optimal political policy is contractionary.

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