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Investigating the Impact of Economic Stabilization Policy on Economic Welfare in Iran within the Framework of the Dynamic Stochastic General Equilibrium Model
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Mosa Masomzadeh1   , Roia Aleemran2 , Sima Eskandari Sabzi3 |
1- PhD student, Department of Economics, Mianeh Branch, Islamic Azad University, Mianeh, Iran
2- Department of Economics, Tabriz Branch, Islamic Azad University, Tabriz, Iran & Department of Economics, Mianeh Branch, Islamic Azad University, Mianeh, Iran , aleemran@iaut.ac.ir
3- Department of Economics, Mianeh Branch, Islamic Azad University, Mianeh, Iran |
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Abstract: (182 Views) |
Among various economic policies, monetary and fiscal policies are the two main tools of economic stabilization policies that can affect different sectors of the economy. The aim of this study is to investigate the impact of economic stabilization policy on economic welfare in Iran within the framework of the dynamic stochastic general equilibrium model. In this study, an open economy model including demand, supply, and policymaking sectors is initially modeled and designed, and then the structural parameters of the model are estimated using quarterly data from 2010-2020. After estimating the model parameters, their effects on economic welfare variables were examined by simulating financial and monetary shocks. The theoretical results obtained from solving the money model in the utility function using the optimal control method indicate that with a decrease in the money growth rate, the nominal interest rate and inflation decrease, leading to an increase in real money balances; but it does not affect the steady-state production and consumption levels. As a result, with a decrease in the monetary expansion rate, the steady-state welfare level increases. Also, the results of the model parameters based on the realities of the Iranian economy and sensitivity analysis indicate that by reducing the money supply growth rate from 22 percent in the base case to 12 percent over 10 periods in a steady state, the inflation rate has decreased from 19.46 percent to 10.57 percent. Also, real money balances per capita have increased from 0.1304 to 0.1352 and the level of welfare per capita has increased from 17.129 to 17.160. Within the framework of the money model in the utility function, per capita production and per capita consumption do not change.
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Article number: 15 |
| Keywords: Economic stabilization policy, economic welfare, stochastic dynamic general equilibrium model |
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Full-Text [PDF 1037 kb]
(67 Downloads)
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Article type: Research |
Subject:
Special
Received: 2021/05/7 | Accepted: 2021/07/23 | Published: 2021/09/1
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