IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

The Effect of the Temporary and Permanent Income Shock to Household’s Consumption in Iran Using Blanchard-Quah Method

Listed author(s):
  • Mowlaei, Mohammad


    (Assistant Professor of Economics, Bu-Ali Sina University)

  • Ali, Oday


    (PhD Candidate in Economics, Bu-Ali Sina University)

Registered author(s):

    Temporary and permanent income shocks are the most important determinants of household’s consumption. According to Friedman's permanent income hypothesis, household consumption always responds to permanent income shock more than temporary shocks. Given that these two components shock separately are unobservable, in this paper we use Blanchard-Quah method to decompose the income shocks into temporary and permanent and then by applying Structural Vector Auto-regression model to identify the effect of that two shock components on household’s consumption in Iran during the 1974-2014 years. The results from the estimated model confirm the validity of the PIH in Iran. So that household consumption almost entirely explained by permanent shocks income. But it does not show sensitivity to temporary shocks.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    File Function: Full text
    Download Restriction: no

    Article provided by Faculty of Economics, Management and Business, University of Tabriz in its journal Quarterly Journal of Applied Theories of Economics.

    Volume (Year): 3 (2016)
    Issue (Month): 3 (November)
    Pages: 93-114

    in new window

    Handle: RePEc:ris:qjatoe:0052
    Contact details of provider: Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ris:qjatoe:0052. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sakineh Sojoodi)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.