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How Do Agricultural Subsectors Respond to Productivity Shocks? Evidence from a Bayesian DSGE Model in Iran

Author

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  • Khosravi, Mahdi

    (Department of Agricultural Economics, Faculty of Agriculture, Shahid Bahonar University of Kerman)

  • Mehrabi Boshrabadi , Hossein

    (Department of Agricultural Economics, Faculty of Agriculture, Shahid Bahonar University of Kerman)

  • Ahmadyan, Azam

    (Monetary and Banking Research Institute)

  • Jalaei, Seyyed Abdolmajid

    (Department of Economics, Faculty of Management, Shahid Bahonar University of Kerman)

Abstract

Understanding the dynamics of productivity shocks is instrumental if we are to identify the sources of economic growth. This paper, investigates dynamic effects of positives productivity shocks to agricultural subsectors during the period from 1991-2015, by disaggregating agricultural sector in Iran into four key subsectors (crops, livestock, fishing and forestry) through an estimated DSGE model. Our Bayesian estimation results suggest that positive productivity shocks lead to an increase in output, consumption, capital, employment and real wages and a fall in marginal costs and price indexes in all four subsectors. Comparing the results across the subsectors shows that following the shocks, generally, crops and livestock have the strongest reactions and forestry has the weakest ones. Additionally, among the variables, output indicates the highest responses to the shocks. Variance decomposition analysis reveals that agricultural fluctuations are mainly explained by productivity, monetary, preference and government spending shocks.

Suggested Citation

  • Khosravi, Mahdi & Mehrabi Boshrabadi , Hossein & Ahmadyan, Azam & Jalaei, Seyyed Abdolmajid, 2016. "How Do Agricultural Subsectors Respond to Productivity Shocks? Evidence from a Bayesian DSGE Model in Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 11(3), pages 305-330, July.
    • Handle: RePEc:mbr:jmonec:v:11:y:2016:i:3:p:305-330
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    References listed on IDEAS

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    More about this item

    Keywords

    Agricultural Subsectors; Bayesian Estimation; DSGE Model; Productivity Shocks;
    All these keywords.

    JEL classification:

    • C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other
    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries

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