Siab Mamipour; Soghra Jafari; Ziba Sasanian Asl
Abstract
The main purpose of this paper is to investigate the effects of monetary and fiscal policies on the business cycles in the Iranian economy during the period 2004-2016. Markov Switching model has been used with time varying transitional probabilities for the recognition of the business cycle and identifying ...
Read More
The main purpose of this paper is to investigate the effects of monetary and fiscal policies on the business cycles in the Iranian economy during the period 2004-2016. Markov Switching model has been used with time varying transitional probabilities for the recognition of the business cycle and identifying the influencing factors on the probability of staying in a period of recession and boom or the transition from one situation to another. The results of the MSIH(2)-AR(2)[1] model show that both expansionary monetary and fiscal policies increase expansion period, but expansionary monetary policy is more effective in expansionary fiscal policy. During the recession regime, fiscal policy has a greater impact than a monetary policy in the transition from the recession regime. Also, findings show that business cycles in Iranian economy have comovements with changes of oil revenues, but the effect of changes in oil revenues has a different effect on the staying or transition of business cycles. Thus, the increase of oil revenues reduces the probability of staying economic boom regime, but it will increase the transition probability of recession to boom regime. In fact, these results indicate that oil revenues are not managed well during the boom period but there is the relatively good management in the recession regime. [1]- Markov Switching Intercept and Heteroskedasticity terms (2 regimes)-AutoRegressive (2 Lags)
Hasan Dargahi; Ahmad Parkhide
Volume 8, Issue 27 , July 2006, , Pages 1-31
Abstract
Since the advent of early business cycles theories based on self-sustaining behaviors, many theories and models have been suggested to explain causes of cyclical fluctuations. Although in the 1960s, with the acceptance of Keynesian ideas there was a less interest to identifying the sources of disturbances, ...
Read More
Since the advent of early business cycles theories based on self-sustaining behaviors, many theories and models have been suggested to explain causes of cyclical fluctuations. Although in the 1960s, with the acceptance of Keynesian ideas there was a less interest to identifying the sources of disturbances, today the debate over the sources and propagation of economic fluctuations still rages among macroeconomists.
This paper uses a multisectoral business cycles model for identifyingication the role and importance of aggregate and sectoral shocks in business cycles of the Iranian manufacturing sectors. Aggregate shocks involve innovations in oil revenues, money supply, government expenditures, and real exchange rate, and productivity shocks are connsidered as sectoral shocks. Our results indicate that all types of shocks are important, but aggregate shocks are the dominant source of sectoral output fluctuations. Variance decomposition of the manufacturing output growth indicates that 85.4 percent of aggregate output disturbances can be explained by aggregate shocks. Therefore, macroeconomic policies inconsistent with industrial development requirements could disturb endogenous growth of the Iranian manufacturing sectors via weak total factor productivity. At the presence of the exogenous impulses, while aggregate shocks are significant sources of output fluctuations, it seems disturbances are threatening the long run economic and industrial growth, even in the oil boom periods.
