Document Type : Research Paper
Authors
1 Department of Economics, Faculty of Economics and Political Science, Shahid Beheshti University, Tehran, Iran
2 Department of Economics, Faculty of Economics and Political Sciences, Shahid Beheshti University
3 Associate Professor of Economics, Faculty of Economics and Political Science, Shahid Beheshti University, Tehran, Iran
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. 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.
Keywords
- Balance of Payments
- Exchange Rate Policy
- Exchange Rate Regime
- Business Cycles
- Dynamic Stochastic General Equilibrium Model
Main Subjects
)