Kiomars Sohaili; Alireza Erfani; Yousef Hayati
Abstract
Exchange rate fluctuations have a major role on business cycles. Due to this degree of importance, this paper analyzed the effects of managed floating exchange rate regime on dynamics of some macroeconomics variables of Iran. To do this, we design a dynamic stochastic general equilibrium (DSGE) model ...
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Exchange rate fluctuations have a major role on business cycles. Due to this degree of importance, this paper analyzed the effects of managed floating exchange rate regime on dynamics of some macroeconomics variables of Iran. To do this, we design a dynamic stochastic general equilibrium (DSGE) model for Iran and then using quarterly data over 1989-2016 and Bayesian method, the structural parameters of the model have been estimated. By employing conditional forecasting, our results show that managed floating exchange rate regime, compared with fixed regime, brings more economic growth and at the same time, less speculative activities in money and exchange markets. Moreover, the results from variance decomposition reveal that exchange rate shocks are the most important shock in deriving business cycles and fluctuations of other variables. Based on these finding, we propose policymaker to choose managed floating exchange rate regime as its policy rule.
Hassan Daliri; Nader Mehrgan
Abstract
The recent financial crisis has raised several questions with respect to the financial institutions and banking industry. Hence, over the last decade the Iranian banking industry has undergone many substantial changes, such as liberalization, government regulation and technological advances. What impacts ...
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The recent financial crisis has raised several questions with respect to the financial institutions and banking industry. Hence, over the last decade the Iranian banking industry has undergone many substantial changes, such as liberalization, government regulation and technological advances. What impacts do these changes have on the policy instruments? We have answered this question in this study. To do this, we used the DSGE models. We also used two kinds of basic DSGE structures: External Finance Premium (EFP) Model and Collateral Constraint (CC) Model. Both models are simulated for Iran. Finally, we have examined the effects of monetary shocks for each model variables. We employed a Bayesian method to estimate the parameters of DSGE models. We have concluded that the prediction power of the EFP models is better than that of CC model. In addition, the results showed that the increase in liquidity raises output, inflation, investment and consumption. Moreover, it was found that the responses of variables to monetary policy in the CC model was greater than of the EFP model.