Money and Monetary Economics
Mohammad Nikzad; Mahdi Yazdani; Hassan Dargahi
Abstract
The balance of payments shocks can affect different economies according to their structure in various scales, so one of the most important of them is the creation of business cycles, which causes key macroeconomic variables such as output, inflation and exchange rate move away from their long-term trends. ...
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The balance of payments shocks can affect different economies according to their structure in various scales, so one of the most important of them is the creation of business cycles, which causes key macroeconomic variables such as output, inflation and exchange rate move away from their long-term trends. The type of exchange rate policy and regime is one of the most important factors in how balance of payments shocks spread and create business cycles. In this research, using a dynamic stochastic general equilibrium model, the effects of different balance of payments shocks, including oil export, non-oil export and the term of trade shocks, are evaluated on the major Iran's macroeconomics variables in different exchange rate regimes by using the criteria of loss welfare. Based on impulse-response functions, research findings show that the fixed real exchange rate regime has the least welfare losses under different balance of payments shocks. Also, the managed floating ERR provides better conditions than the floating exchange rate regime, while the fixed nominal exchange rate regime presents the greatest welfare losses. Also, the results show that if the intervention of central bank were at least, the recessionary effect of the negative shock is lowest, but the inflationary effect is highest, in the short-run.
Naser Khiabani; mahbubeh delfan
Abstract
This study investigates how fiscal policy shocks affect macroeconomic activities in an oil exporting economy using a real business cycle model (RBC). We make distinction between public sector of economy from private sector and evaluate the effect of public crowded- (in or out) effect on private sector. ...
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This study investigates how fiscal policy shocks affect macroeconomic activities in an oil exporting economy using a real business cycle model (RBC). We make distinction between public sector of economy from private sector and evaluate the effect of public crowded- (in or out) effect on private sector. Our findings indicate that in Iran, a positive fiscal expansion- a positive consumption expenditure shock- does not have a positive, sizeable and permanent effect on the investment, employment and production of private sector. On the other hand, the results show that the shock has a negative effect on private sector consumption expenditure. This result is consistent with the Ricardian equivalence theorem, suggesting that a government cannot stimulate spending since people assume that whatever is gained now will be offset by higher taxes in the future.
Meysam Rafei; Javid Bahrami; Davood Daneshjafari
Volume 14, Issue 54 , October 2014, , Pages 33-65
Abstract
In this paper by using a dynamic stochastic general equilibrium model we study how macroeconomic variables are affected by different shocks using fiscal reaction functions for Iran’s economy. For this purpose we compare the results of a real business cycles model in a baseline scenario, in which ...
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In this paper by using a dynamic stochastic general equilibrium model we study how macroeconomic variables are affected by different shocks using fiscal reaction functions for Iran’s economy. For this purpose we compare the results of a real business cycles model in a baseline scenario, in which the government does not follow any specific reaction to the shocks and alternatives in which the government reacts counter and pro cyclically to the shocks. Results of the simulations indicate that when the government follows backward looking fiscal rules the deviation of the variables from steady state increases. In other words, in a real business cycle model for the Iranian economy, we show that the consequence of the government’s intervention in the economy is economic instability in Iran.
