Showing 12 results for Dsge
Seyed Fakhredin Fakhrehosseini, Asghar Shahmoradi, Mohammad Ali Ehsani,
Volume 12, Issue 1 (5-2012)
Abstract
Fluctuations in fiscal policy affect monetary policy and the central bank, because the government’s general budget is highly dependent on oil prices and its fluctuations. Therefore, this paper designs a New Keynesian model for Iran with nominal rigidities (prices and wages) and analyzes the impact of technology, oil price, government spending and money supply shocks on macroeconomic variables (inflation, output) in economy of Iran. The data in this article are related to the fixed prices in the year 2004 and run annually from 1966 to 2008 on a per capita basis. Having logarithms taken, the variables are de-traded through Hodrick - Prescott filter. The final model equations are linearized around the steady state and using Uhlig (1999) approach, accidental equations are also linearized and are specified as space state pattern in Matlab software. Finally, the calibration of parameters are assessed, variables are simulated and compared with real data. The results show that the recommended model can simulate the impact of shocks on macroeconomic variables. It also shows that inflation rises in response to all shocks except that of technology. As the figures show, it is also revealed that non-oil output increases in response to technology, oil price, government spending and money supply.
Marzieh Esfandyari, Nazar Dahmardeh, Hossein Kavand,
Volume 14, Issue 1 (3-2014)
Abstract
The substantial share of informal employment in Iran, on the one hand and the growing use of dynamic stochastic general equilibrium models in analyzing economic policies by central banks and eliminating the flaws of these models, on the other hand, necessitate designing a dynamic stochastic general equilibrium model with dual labor market based on Iran's economy. To do so, the current study divides labor market into formal and informal sectors. In addition, it classifies firms in formal and informal ones regarding the type of the production function and labor. The annual data used in the model are collected from the Central Bank and the Statistical Center of Iran during 1974-2010. After calibrating and solving the model with numerical method, the shock effects of total factors productivity, government expenditure, oil revenue, and money growth on real variables of the model have been analyzed with and without nominal wage rigidity. The results of the study suggest that the informal sector of the labor market in different business cycles acts as a buffer with countercyclical shift. The money is not neutral in the short run due to lack of rigidity in a model of monopolistic competition, so money supply affects real variables of economy.
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Volume 14, Issue 1 (3-2014)
Abstract
In this paper, we design a Dynamic Stochastic General Equilibrium (DSGE) model to investigate effects of fiscal dominance on inflation rate in Iran and solve it by calibration method. In order to getting reliable results, the second-order moments of main variables were compared based on actual and simulated data; and functions of impulse response to model innovations were considered. The results show that the degree of fiscal dominance in Iranian economy is about 92%, i.e., the independence degree of monetary and fiscal policies is nearly 8%. Therefore, decreasing fiscal dominance may lead to decreasing inflation rate in Iran. In addition, any action for increasing independence of central bank and decreasing dependence of government on seigniorage revenue will play important role in reducing inflation rate in Iran.
Bahram Sahabi, Hossein Asgharpur, Saeed Qorbani,
Volume 17, Issue 2 (6-2017)
Abstract
The issue of asymmetric effects of monetary shocks on the economy is among the new topics that have been studied by the New Keynesians. How to monetary shocks affect macroeconomic variables such as gross domestic product (GDP), prices, private investment in terms of nominal and real sectors, and economic policy-making is of great importance. In this study, according to the New-Keynesian assumptions, the effects of asymmetry in monetary shocks are examined using dynamic stochastic general equilibrium model in Iran's economy during 1979-2012. The results indicate that positive and negative monetary shocks are endogenous and depend on inflationary regimes in the Iranian economy, so that the effects of positive and negative shocks on GDP and private investment in the low inflation regime are more than those of high inflation regime. In addition, the effects of positive and negative shocks on the general prices' level in the high inflation regime are higher than those of low inflation regime.
Dr Hussein Marzban, Zahra Dehghanshabani , Dr Parviz Rostamzadeh, Hamid Izadi,
Volume 18, Issue 3 (8-2018)
Abstract
The aim of this study is to investigate optimal monetary and fiscal policies for the Iranian economy considering Ramsey problem. Using a Dynamic Stochastic General Equilibrium model, the effects of imposing various taxes such as consumption tax, capital income tax, labor income tax and profit tax are examined by different scenarios. The results indicate that Friedman’s rule, or zero inflation is determined as optimal monetary policy under scenarios with and without price rigidities. In addition, since the governments try to minimize the distortions from taxes levied on different economic sectors, necessity of a subsidy or negative tax is confirmed under Ramsey conditions. According to the findings, the inflation rate not only depends on nominal and real rigidities assumed in the model, but also to the number of instruments available to the Ramsey planner.
Dr Elham Gholami,
Volume 19, Issue 1 (4-2019)
Abstract
The application of fiscal stimulus programs (FSPs) to achieve economic growth requires knowing the source of its funding, because different methods and various taxation bases for financing of the FSPs affect their effectiveness and influence the economy. The objective of this paper is to choose the best tax base to finance FSPs in Iran, according to the lowest distortionary effects on efficiency of increasing government spending. For this purpose, first a dynamic stochastic general equilibrium (DSGE) model is designed for Iran. The model consists of three economic factors including the household, domestic firms, and the government as fiscal and monetary authority, and its reliability is checked through the calibration procedure. Then, the multiplier of government spending is estimated within four scenarios for financing government spending. These include the application of tax on income, tax on consumption, a combination of tax on income and tax on consumption (value added tax) and the budget deficit policy. The results show that taxation compared to a budget deficit policy results in decreasing efficiency of the government's fiscal stimulus. However, the reaction of domestic production to the increase in government spending indicate that while a tax on consumption may cover government spending, it has a low negative effect on the efficiency of this fiscal stimulus.
Volume 19, Issue 6 (11-2017)
Abstract
This study aimed to develop a multi-sector Dynamic Stochastic General Equilibrium (Large DSGE) model for Iran’s economy. In this model, economy was divided into three sectors: Agriculture, non-agriculture, and oil. Imports and exports were also included in the model. In order to adapt the model with Iran’s economic conditions, price stickiness in agriculture and non-agriculture were included. Then, the impact of rising oil prices on agricultural sector was examined. To calculate the required coefficients, 1971-2012 data was gathered and Bayesian method was used. The results showed the negative impacts of rising oil prices on agriculture as well as the negative effects of Dutch Disease.
Mr. Mohammad Dehghan Manshadi, Dr Karim Eslamloueyan, Dr Ebrahim Hadian, Dr Zahra Dehghan Shabani,
Volume 20, Issue 3 (9-2020)
Abstract
The interaction between institutional quality and the mechanism of oil shock diffusion might have a significant effect on macroeconomic dynamics in an oil-exporting country. The literature lacks a formal model to address the role of institutional quality in the economic performance of an oil-rich developing economy. Using a new Keynesian dynamic stochastic general equilibrium (DSGE) framework, this study develops a model to investigate the response of macroeconomic variables to changes in institutional quality resulted from oil shocks in Iran as an important oil-exporting country. Our modeling allows us to show how institutional quality and oil revenues affect households, firms, government, and the central bank. The model is solved and calibrated for the period 1959-2017. The results indicate that the destruction of institutional quality caused by a positive oil shock prevents the Iranian economy from reaping the fruits of an increase in oil revenues. Oil revenues and their shocks by destroying the institutional quality through the expansion of rent-seeking activities, increasing transaction costs of production, reducing the impact of government spending, and diverting monetary and fiscal policies from the targets result in negative effects on Iran's non-oil production in the long run. To reduce the destructive effects of oil shocks on institutional quality in the Iranian economy, we suggest the policymakers in Iran reduce the dependency of the government budget on oil revenues.
Mr. Habib Mosavi, Dr Nader Mehregan, Dr Mohammedreza Yousefi Sheikh Robat,
Volume 21, Issue 3 (9-2021)
Abstract
Financial markets, especially the capital market, may have strong links with other economic sectors. One of the most important aspects of investment is to determine the “optimal investment portfolio”. To date, some research has been conducted to determine the optimal portfolio with” artificial intelligence” and “Fuzzy Logic”. However, we determine the optimal portfolio based on Dynamic Stochastic General Equilibrium (DSGE) model. This study examines the design and calibration of the new Keynesian dynamic stochastic equilibrium model related to an optimal investment portfolio and the effect of shocks such as productivity shocks and foreign exchange earnings’ fluctuation shocks on macroeconomic variables. To this end, we design a DSGE model with sectors of households and firms, government and the central bank, and calibrate the model’s parameters after logarithm–Linearization using seasonal data of 1996-2016 and results of empirical studies. In the designed model, households maintain a portfolio of stocks, cash, securities, and other assets based on risk and return or an optimal portfolio. In the end, we assess the impulse response function of economic variables to shocks of productivity and foreign exchange earnings. Ultimately, the comparison of the present moments in the current study and moments of real data indicates the relative success of the model with regard to the realities of Iranian economy.
Mr. Mohammadjavad Khosrosereshki, Dr Reza Najarzadeh, Dr Hassan Heydari,
Volume 22, Issue 2 (6-2022)
Abstract
The purpose of this study is to investigate the impact of adding a non-Ricardian household to a DSGE model in choosing the Ramsey optimal monetary policy and consequently the effects on macroeconomic variables (such as output gap, consumption gap, inflation, and rising nominal exchange rate). Therefore, after estimating a model for the Iranian economy, the Ramsey optimal monetary policy was selected from 6 monetary policy alternatives. Then, in two scenarios, a non-Ricardian household is added to the model. In the first scenario, the non-Ricardian household consists of 20% of households and in the second, it consists of 40% of households. Then, Ramsey optimal monetary policy was selected for these two scenarios. The results show that the when the percentage of non-Ricardian households in the model increases, monetary policy-maker deviates from targeting monetary variables and gives more importance to production targeting. Second, if Ramsey optimal monetary policy is chosen without considering the non-Ricardian household in the model, in facing the shock of falling oil prices, the shock of declining money demand and the shock of rising external inflation, the responses of the production and consumption sectors in scenarios 1 and 2 are significantly different from the baseline model. But the consumption and production sectors have almost the same reactions in three models in response to the shock of the rising nominal exchange rate.
Dr Naeim Shokri, Dr Abbas Assari Arani, Dr Ali Asgary, Dr Amirhosein Mozayani, Dr Nematollah Akbari,
Volume 22, Issue 3 (9-2022)
Abstract
Today, the share of government aid from the public expenditures to support military and civil servants' pension funds has increased from about 11% in 2013 to 19% in 2021 and this trend has been increasing in recent years. This study aims to use DSGE models to simulate and apply corrective measures to enhance the financial misalignment of Iran's pension system. For this purpose, the model has been calibrated once for the PAYG-DB system that is currently used in Iran and then for the system based on financial provision based on the amount of partial savings to compare their welfare and distributional effects. The simulation results show that people reduce their savings by switching to a partial savings system, which increases consumption in all generations and capital accumulation in the whole society. In the second part of the article, impulse response functions were used to investigate the effects of emerging diseases and population aging variables on the financial misalignment of pension funds. The results show that the financial misalignment of pension funds increases following the positive shock in the above variables. Based on the results, parametric reforms such as a mechanism linking the retirement age to life expectancy and transition to a partial savings system can reduce financial misalignment and increase financial sustainability in Iran's pension system.
Dr Hossein Samsami Mazreeh Akhoond, Mr Ahmad Bakhtiyari,
Volume 24, Issue 2 (5-2024)
Abstract
Introduction
The volume of the external money supply is determined by the policymaker, but the amount of money and liquidity will be influenced by the individual's decision to combine their portfolios and the behavior of banks (through lending channels and balance sheets) in the internal money supply. From this perspective, the initial change in external currency (monetary base) causes changes in the supply and demand of all types of assets (such as external and internal money) and their rate of return, and the behavior of individuals and banks determines the optimal composition of the portfolio of assets of individuals and banks and the new and balanced composition of liquidity volume. . Due to differences in the structure of the economy in different countries, the external currency itself can be created from different origins, the exogenous increase of each component of the central bank's asset column (monetary base) causes a change in the relative supply of that asset and its rate of return. Liquidity changes have different sources and are due to changes in the supply of different assets that make up different components of liquidity resources and since the components of liquidity resources are not of the same kind and originate from different processes can have different effects on the performance of macroeconomic variables. The purpose of this article is to analyze and investigate the mechanism of the effect of the components of liquidity resources on the macroeconomic variables of Iran. Changes in liquidity have different sources and are caused by changes in the supply of different assets that form different components of liquidity
sources and can have different effects on the performance of macroeconomic variables. For this purpose, a macroeconomic model by including the components of liquidity resources including net foreign assets of the central bank, net foreign assets of banks and non-bank credit institutions, net debt of the public sector to the central bank, net debt of the public sector to banks and non-bank credit institutions and Non-governmental sector debt is designed to show the relationships of economic variables in the framework of a dynamic stochastic general equilibrium model provides.
Methodology
The model presented in this research is a small open economy consisting of six sectors of households, firms, foreign sectors, banks and credit institutions, government and central bank within the framework of dynamic stochastic general equilibrium model of new Keynesians with respect to nominal and real frictions. By optimizing the objective functions of each of the above brokers, the result of the obtained economic relations is a system of nonlinear differential equations under rational expectations that are currently not empirically solvable, especially in larger patterns. But we can use approximation technique to calculate the model solution in the approximate range functionally. In this research, the set of equations is linear logarithmic using the Ahlik method (1999). In the next step, the input values of the pattern and calibration of parameters and variables have been done using the Iranian economy data during the period 2000-2020. Then, using the Dynar software, the system of equations based on the Bunchard-Kahn method is solved. The results of the statistical tests and moments indicate that the proposed model is suitable for simulating Iran's economy.
Results and Discussion
In order to evaluate the different effects of liquidity resources on economic variables, the reaction of these variables to liquidity component shocks based on instantaneous reaction functions has been investigated. The findings of the research show that the net assets of the banking system through balance of payments and net debt to the banking system through the channel of the state financial balance, if the source of liquidity is created, increases the variables of production, consumption and investment and causes mild growth or decrease of inflation and exchange rate variables. However, if the source of the liquidity creation of non-governmental debts is from the channel of facilitation, it has a decreasing effect on the variables of production, consumption and investment, and only increases inflation and exchange rate. The two sources of the net assets of the banking system and the net of government liabilities to the banking system, contrary to the source of non-governmental sector debt due to the creation of added value in the economy, have more productive effects and investment and less inflationary effects, hence, macroeconomic stability will bring.
Conclusion
The reaction of macroeconomic variables for the same liquidity growth based on instantaneous reaction functions shows that different components of liquidity sources have different effects on macroeconomic variables. These results carry the policy message that, in addition to liquidity management, attention to the developments in liquidity resources components is also important in the field of monetary policy. Considering that liquidity has increased by about 5% in all five components of liquidity components, the effects and implications of the five components of liquidity creation sources can be examined. Comparative results indicate that for the specific growth of liquidity, the increases caused by the net assets of the banking system and the net of public sector liabilities to the banking system have more productive and investment effects and less inflationary effects, hence macroeconomic stability. Therefore, it is recommended that the monetary transition policy as much as possible prevent the increase in non-governmental sector debt which leads to increased liquidity.
