Economics Research

Survey of the Impacts of Aggregate Supply and Demand Shocks in Iran Economy

Document Type : Research Paper

Authors

hossein akbarifard 1
Mohammad Sajjad Koushesh 2

1 Assistant Professor, Faculty of Economics, Shahid Bahonar University of Kerman

2 . M. S. in Economics, Shahid Bahonar University of Kerman

Abstract
We interpret fluctuation in GDP and unemployment  rate as due to
two types of disturbances: disturbances that have a permanent effect
on output and disturbances that don’t. We interpret the first as supply
disturbances, the second as demand disturbances. This paper surveys
the effects of demand and supply disturbances on variables GDP and
unemployment in Iran economy. So with using Blanchard-Quah
econometric technique, shocks will be divided into two sections: the
supply shocks and demand shocks. Then, we survey the effect of these
two shocks on GDP and unemployment in Iran with using Structural
Vector Auto Regressive (SVAR) method, impulse response function
and variance decomposition. Results report that supply shocks
proportion in explaining the GDP and unemployment fluctuation are
45/5 and 30/87 and the demand shock proportion are 54/56 and 69/21. 

Keywords

Demand and Supply Shocks
Blanchard–Quah Technique
SVAR Econometric Model

  • Receive Date 05 October 2009
  • Revise Date 17 December 2009
  • Accept Date 10 February 2010

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