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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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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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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