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Estimating of the Equilibrium Situation of Iran’s Economy within RBC Models

Author

Listed:
  • Mehregan, Nader

    (Professor of Economics, Bu-Ali Sina University)

  • Isazadeh, Saeed

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

  • Abbasian, Ezatollah

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

  • Faraji , Ebrahim

    (Ph.D. Candidate in Economics, Bu-Ali Sina University)

Abstract

It seems to be essential, define and compute an equilibrium for the Iran’s economy in order to derive explicit predictions about the mechanism of Real Business Cycles in Iran. In this article, it is attempted to estimate some important parameters and functions of Real Business Cycle models in the equilibrium situation of Iran’s economy based on the model introduced by McCallum (1989). Therefore, first the key function of McCallum is conducted using the annual time series in the period of 1959-2012, then production, household utility and Technology functions are obtained. According to the results presented in this article, elasticity of production to capital asset is 0.47 and the persistency of economy’s technology shocks is 0.79. Moreover, the persistency of technology shocks in both agriculture and oil sector are higher than all other existing sectors. Furthermore, the time preference rate and discount factor are 0.11 and 0.90 respectively. The elasticity of consumption to Leisure in Iran is 1.85.

Suggested Citation

  • Mehregan, Nader & Isazadeh, Saeed & Abbasian, Ezatollah & Faraji , Ebrahim, 2016. "Estimating of the Equilibrium Situation of Iran’s Economy within RBC Models," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 3(2), pages 1-22, July.
    • Handle: RePEc:ris:qjatoe:0040
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    More about this item

    Keywords

    Real business cycle; Production function; Household utility function; Technology shocks.;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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