Authors
1 Associate Professor, Faculty of Economics, University of Tehran
2 Lecturer at the Faculty of Economics, Tehran University
Abstract
The purpose of this study is to discern the interaction between nominal and real sectors in the context of an oil exporting economy such as Iran. The methodology uses a modeling strategy named structural VECM which provides a practical approach to incorporating long - run structural relationships, suggested by economic theory in an structural VAR model. The strategy is applied in the construction of a small quarterly macro econometric model of Iran estimated over the period 1350 QI - 1376 Q4 (1971Q1- 1997Q4) in eight core variables: output, import, price, money, exchange rate, wage, productivity and premium. Our results suggest that the usefulness of the IS/LM model to interpret economic effectuations in Iran is limited and provide support to what McCallum (1989) calls, "Weak" version of equilibrium (real) business Cycles models.
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