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Publication Date: 2021
Iranian Economic Review (10266542) 25(3)pp. 509-523
This paper uses a dynamic stochastic general equilibrium model to investigate the effect of fiscal and monetary policy on the stock market in Iran. Results show that a positive money shock leads to a rise in output, stock price index, and inflation. In addition, the response of the stock demand to money supply shock is negative. We found that a positive government expenditure shock led to a rise in output and inflation. The response of stock demand and stock price index to the government expenditure shocks are negative. Furthermore, results show that a stock market shock leads to a rise in output and inflation. © University of Tehran.
Publication Date: 2021
Resources Policy (03014207) 70
The political history of Iran in the last 67 years shows that Iran has always been the target of sanctions especially oil-related sanctions imposed by other countries and international organizations. Oil sanctions in the form of export, extraction technology, and foreign financing are the most important sanctions that have had significant effects on Iran's macroeconomic variables. Therefore, in this paper an attempt has been made to analyze the impacts of the abovementioned sanctions on the Iranian economy in the form of a Dynamic Stochastic General Equilibrium Model with the New Keynesian approach. The simulation of amplifying the intensity of the shock of oil sanctions demonstrates that the oil sanctions in the oil industry, reduce the amount of foreign and government investment, extraction technology level and oil export which causes a reduction in oil production. In the monetary and exchange sector, the sanctions reduce the central bank's foreign reserves ratio to the money base which increases the nominal exchange rate and in turn, raises the non-oil exports and causes a drop in imports. Regarding the government sector, government oil revenues decrease and this calls for the creation of money and seigniorage by the central bank for financing budget deficits such that the government pushes the budget towards maintaining the current expenditure and falling capital expenditure. In the household sector, there are increases in consumption expenditure and decreases in investment expenditure due to the expected inflation and ultimately, there is an increase in domestic products due to an increase in non-oil exports and decreased import and this subsequently raises the inflation. © 2020 Elsevier Ltd
Publication Date: 2020
Journal of Economic Structures (21932409) 9(1)
There are many reports on investigating the influences of institutional factors and Piketty’s Hypothesis on income inequality; nonetheless, the inequality effects of both factors are seemingly investigated separately. We hypothesize that economic freedom viewed as an institutional improvement or distortion has comparatively larger effects on inequality than the forces of income divergence introduced by Thomas Piketty. This article revisits the income inequality–(r–g) nexus and uncovers the role of economic freedom as an institutional indicator in explaining the relationship. Considering the latest inequality data of World Inequality Database (WID) and Standardized World Income Inequality (SWIID) for 82 countries over 2000–2017, an inequality model is estimated that explicitly captures the interaction effect of (r−g) and economic freedom. Reaffirming that economic freedom affects inequality in a non-linear form, we also found evidence that (r−g) raises inequality in the short run, demonstrating that preexisting holders of capital derive greater shares of income. Nevertheless, the effect of (r–g) is not as strong as that of economic freedom and is insignificant in highly unequal countries. This implies that institutional factors play a more important role than Piketty’s Hypothesis in the presence of high inequality. Furthermore, variables of inflation, gross savings rate, trade openness, and unemployment rate are shown to be the most consistently positive and significant factor and GDP per capita, government spending, natural resource rent, and tax revenue variables have negative and significant effects on the baseline estimations. © 2020, The Author(s).
Publication Date: 2020
Journal of Economic Studies (01443585) 48(4)pp. 761-785
Purpose: The purpose of the current paper is to analyze the simultaneous effects of oil sanctions and financial sanctions on Iran's macroeconomic variables in a small open economy in the dynamic stochastic general equilibrium (DSGE) framework. Design/methodology/approach: A DSGE model with the new Keynesian approach has been designed for the above mentioned purpose giving consideration to households, production, trade, oil, government and central bank sectors. All of the parameters were calibrated by using geometric means of macroeconomic variables in 2004–2017 as the steady-state values of the variables in the static model. Findings: Amplifying the intensity of the oil sanctions reduces oil production due to decreasing investment, technology and export of oil and reduces the central bank's foreign reserves ratio to the money base that leads to an increasing exchange rate. Furthermore, oil sanctions decrease the government revenues due to a decrease in oil export and by the government imposing an expansionary fiscal policy in the form of increasing current expenditure and preserving construction expenditure to prevent deepening the recession, which causes budget deficit and then the issue of more bonds with a higher nominal interest rate. On the other hand, financial sanctions raise transaction costs and marginal costs in the trade sectors that lead to inflation and a decrease in nonoil export and various kinds of imports. Due to inflation and uncertainty, consumption of a household increases and investment expenditure of a household decreases. Originality/value: To the best of the author's knowledge, few studies in the world have analyzed the economic effect of the sanctions in the framework of DSGE models. There is no study in Iran to date which investigates the effects of the sanctions in the form of a DSGE model. So, this paper is the first study in Iran and one of the few studies in the world using a DSGE model for analyzing the effects of sanctions. Imposing three kinds of oil sanctions in addition to a financial sanction is another innovation of the current paper. © 2020, Emerald Publishing Limited.
Publication Date: 2019
Iranian Economic Review (10266542) 23(3)pp. 749-768
The welfare cost of inflation in a new Keynesian model has been studied in this article. Nominal prices and wages are subjected to Rotenberg's adjustments in the benchmark model. In addition, this study uses the CIA model to compare the welfare cost of seigniorage tax and consumption tax. The model is calibrated for the Iranian economy and the results of the calibration are as following: In a steady state, a seigniorage tax imposes higher costs on social welfare rather than consumption taxes. We also find that the welfare cost of inflation increases linearly with the inflation rate and the welfare cost in a model without the government is higher than the model with government expenditures. Numerically, in the benchmark model, an annual inflation rate of 10% entails a welfare cost (relative to a -1.5% annual inflation rate, the Friedman Rule’s level of inflation rate) of 1.69% of a steady state consumption without a government. If we add the government to the model, this cost will be 1.28%. This amount will be only 0.5% if we use the RBC model. According to Ascra's measurement (2009), inflation tax increases welfare costs, but consumption tax decreases welfare costs. © 2019, University of Teheran. All rights reserved.
Publication Date: 2018
Iranian Economic Review (10266542) 22(2)pp. 503-526
here is always uncertainty about the soundness of an economic Tmodel’s structure and parameters. Therefore, central banks normally face with uncertainty about the key economic explanatory relationships. So, policymaker should take into account the uncertainty in formulating monetary policies. The present study is aimed to examine robust optimal monetary policy under uncertainty, by a cost-push shock to the Iran’s economy. For this purpose, three new-Keynesian Phillips curve equations are used, and robust discretionary optimal monetary policy is formulated by employing Hansen and Sargent robust control approach (2002). In all three curve equations, robust discretionary monetary policy is more aggressive comparing to the rational expectations. Considering the last period inflation rate in New-Keynesian Phillips curve, the degree of aggressiveness of robust monetary policy reduces, and with reducing the weight of the last period inflation rate, more reduction in the degree of aggressiveness of monetary policy is observed. On one hand, in all three models, with increasing the weight of inflation in the loss function of monetary policymakers, robust monetary policy is still more aggressive than the monetary policy under certainty. On the other hand, the degree of aggressiveness of monetary policy decreases, while the expected loss increases. © 2018, University of Teheran. All rights reserved.
Publication Date: 2011
Economic Modelling (02649993) 28(1-2)pp. 694-700
Publication Date: 2011
Economic Computation and Economic Cybernetics Studies and Research (0424267X) 2pp. 177-189
Ramsey Optimal Growth model is widely used in dynamic macroeconomics. Graduate and undergraduate students have problem in doing with Ramsey Model. In this paper we try to solve Ramsey model using Genetic Algorithm. Genetic Algorithm is a new optimization approach that is widely used in dynamic analysis. It seems that solving optimization problems with GA approach will produce better results than Excel solver.
University of Isfahan
Address: Isfahan, Azadi Square, University of Isfahan
