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The Effects of Energy Price Reform on Iranian Economy: Dynamic Stochastic General Equilibrium Approach (DSGE)

Author

Listed:
  • Farazmand, Hasan

    () (Associate Professor in Economics, Shahid Chamran University of Ahvaz)

  • Arman , Seyed Aziz

    () (Associate Professor in Economics, Shahid Chamran University of Ahvaz)

  • Afghah , Seyed Morteza

    () (Assistant Professor in Economics, Shahid Chamran University of Ahvaz)

  • Ghorbannezhad , Mojtaba

    () (Ph.D. Candidate in Economics, Shahid Chamran University of Ahvaz)

Abstract

The aim of this study is to design a dynamic stochastic general equilibrium model with nominal and real rigidities to study the effects of energy price reform on macroeconomic in Iran. We tried to consider important mechanism of energy prices on the macroeconomic. In this regard, energy consumption in the household bundle is included as a separate commodity. Also, energy was considered as an input in the production function, so that, the mechanisms impact on both the supply and demand to be considered. Impulse response functions show that, an energy price shock (one standard deviation) led to decrease in production, lower private consumption and investment returns. Also, an oil price shock increases production, inflation, consumption and investment returns.

Suggested Citation

  • Farazmand, Hasan & Arman , Seyed Aziz & Afghah , Seyed Morteza & Ghorbannezhad , Mojtaba, 2016. "The Effects of Energy Price Reform on Iranian Economy: Dynamic Stochastic General Equilibrium Approach (DSGE)," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 3(2), pages 49-76, July.
  • Handle: RePEc:ris:qjatoe:0042
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    More about this item

    Keywords

    Economic growth; Energy price reform; Inflation; DSGE model.;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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