:: Volume 9, Issue 2 (Spring 2014) ::
J. Mon. Ec. 2014, 9(2): 87-117 Back to browse issues page
Oil Price Shocks and Economic Fluctuations in Iran as a Small Open Oil Exporting Economy
Maryam Faraji 1, Afshari Zahra1
1- Alzahra University
Abstract:   (1179 Views)

Oil price shocks are the major source of economic instability in oil exporting developing countries, including Iran. In this paper a Multi Sector Dynamic Stochastic General Equilibrium model, with emphasis on optimization of oil sector as a producing sector is designed. Furthermore, an optimizing import sector is introduced into the model by considering the price rigidity in imported goods as a source of inefficiency in a New Keynesian open economy. The impact of oil price shocks on the dynamics of the economic variables is considered during 1988:1-2011:1. For this purpose, the Bayesian approach is used to estimate the model. The impulse response functions show that immediately after an oil price shock, output increases in the oil sector, while in the non-oil sector the result is reverse. Furthermore, GDP, consumption and inflation increase, while the employment and real exchange rate decreases immediately and finally, all the variables converge to their steady state values.

JEL Classification: C61, D50, E12, Q43

Keywords: Impulse Response Functions, New Keynesian, MDSGE, Bayesian approach
Full-Text [PDF 847 kb]   (562 Downloads)    
Type of Study: Research | Subject: Economics
Received: 2016/10/22 | Accepted: 2016/10/22 | Published: 2016/10/22


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Volume 9, Issue 2 (Spring 2014) Back to browse issues page