Macroeconomic Performance in Different Exchange Rate Regimes: An Estimated DSGE Approach

Tavakolian, Hossein; Afzali Abarquyi, Vajihe

doi:10.22054/joer.2016.5290

Document Type : Research Paper

Authors

¹ Assistant Professor, Faculty of Economics, Allameh Tabataba’i University

² PhD in Monetary Economics, Tarbiat Modares University

https://doi.org/10.22054/joer.2016.5290

Abstract

Selection of exchange rate regime and its consequences, is one of the major issues in international finance. Dependence of Iran to oil export revenues gives an important role to exchange rate policy in the economy. Using a dynamic stochastic general equilibrium open economy model for Iran, macroeconomic performance of the economy in three exchange rate regimes of floating, managed floating and fixed exchange rate regimes are compared. The model includes households, firms, government, monetary authority and foreign trade sector and the model also consists of Calvo price rigidity in production sector. The model is estimated by optimization of activities in different sectors, linearization of resultant equations and Bayesian estimation of parameters using macroeconomic data of Iran. The results show that inflation fluctuations response to oil and technology shocks are more volatile than other shocks. In the fixed exchange rate regime inflation variation is the lowest and output variation is the highest.

Keywords

References

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Economics Research

Macroeconomic Performance in Different Exchange Rate Regimes: An Estimated DSGE Approach

References

References

Kydland, F. E.; E. Prescott (1982), “Time to Build and Aggregate Fluctuations”, Econometrica ,Vol. 50, No. 6 (Nov. , 1982), pp. 1345-1370.

Volume 16, Issue 61 - Serial Number 61
July 2016
Pages 81-125

Macroeconomic Performance in Different Exchange Rate Regimes: An Estimated DSGE Approach

References

References

Kydland, F. E.; E. Prescott (1982), “Time to Build and Aggregate Fluctuations”, Econometrica ,Vol. 50, No. 6 (Nov. , 1982), pp. 1345-1370.

Volume 16, Issue 61 - Serial Number 61July 2016Pages 81-125

Volume 16, Issue 61 - Serial Number 61
July 2016
Pages 81-125