bayesian estimation

 Studies and contributions of structural vector autoexplanatory models using Bayesian and classical techniques have provided evidence that shocks to the marginal efficiency of investment are the main drivers of economic volatility in US postwar data. However, dynamic stochastic general equilibrium models attempt to explain the movement of consumption with production following a marginal efficiency of investment (MEI) shock. Indeed, the decline in consumption after a positive MEI shock contradicts empirically identified business cycles. This issue is referred to as the consumption puzzle. In other words, consumption usually decreases after a positive investment shock in the model. Therefore, the usual DSGE models do not produce the observed co-movement between macroeconomic variables in response to the marginal efficiency of investment shock. From an empirical perspective, consumption, investment, working hours and production all move together. This lack of coordination of consumption in response to investment shocks is problematic as an importantsource of business cycles.A review of empirical studies indicates that investment shocks and consumption puzzle have received limited attention. In this regard, the main aim and innovation of the current study is to set up a dynamic stochastic general equilibrium (DSGE) model and use the Bayesian approach for Iran in order to bridge this study gap as much as possible. The marginal efficiency of investment shock is a source of exogenous changes in the efficiency with which the final good can be converted into physical capital and thus into future capital input. This change may be due to technological factors specific to the production of investment goods. On the other hand, exogenous changes in efficiency can result from disturbances in the process of converting these investment goods into productive capital. In neoclassical models, after a positive MEI shock, households trading in financial markets increase their investment and reduce consumption. In fact, an intertemporal substitution effect occurs between the current consumption and investment, which creates a negative wealth effect and, therefore, creates the so-called consumption puzzle. The mechanism behind the puzzle was first described by Barrow and King (1984). The idea is that if an efficient equilibrium exists, the marginal rate of substitution between consumption and leisure should equal the marginal product of labor. This condition implies that with exogenous shocks that only indirectly affect marginal production labor, as MEI shocks actually do, consumption and labor hours move in opposite directions. Therefore, although MEI shocks account for up to 60% of the variance in output and working hours, the argument that investment shocks are one of the most important drivers of macroeconomic fluctuations is challenging.

The core of current research model is derived from the studies of Rohe (2012) and by expanding it, the marginal efficiency of investment shock and the consumption puzzle have been modeled for Iran. To estimate the model parameters, the Bayesian method, and the Random Walk Metropolis-Hastings algorithm were used. The data of the model’s observable variables include seasonal adjusted data, gross domestic production, private consumption, private investment, government expenditure, and inflation rate (gross) from 2004 to 2022, which underwent a de-trending procedure using the Hodrick-Prescott filter.

The marginal efficiency of investment shock leads to an increase in the rate of return on capital and investment. Consumption behavior is similar to investment behavior but with less volatility. Due to the increase in the demand side of the economy, inflation will increase and the real exchange rate will decrease. In response to the increase in the demand side, production, wage rates and employment increase. It should be noted that the contractionary monetary policy has led to a reduction in the fluctuations of macroeconomic variables, yet the dynamic of the variables has not changed.

 In justifying these results, the average mark-up equation of the economy can be used:Mup,t=MPNtWtPt  where, Mup,t  is the average mark-up, MPNt  is the marginal product of labor, Wt  is the nominal wage rate and Pt  is the price index in period t.The equilibrium conditions of the labor market can also be introduced as follows:1Mup,tMPNtNt=MRStCt , Nt  Despite nominal price stickiness, firms are not able to increase their prices in response to the increase in demand caused by the investment boom resulted from shocks. Therefore, the average mark-up of the economy decreases and effectively shifts the labor demand curve upwards. In this situation, consumption and working hours increase. In other words, in spite of inseparable preferences and in the conditions that the increase of working hours has a positive effect on the marginal utility of consumption (the complementarity of working hours and consumption), the co-movement of investment, production, working hours and consumption can be justified and the puzzle of consumption does not occur

Globalization and digitization, especially the emergence of innovative payment solutions from fintech and large technology companies, have prompted central banks to consider upgrading payment system infrastructure as well as the broader concept and provision of money. The supposed trend towards a cashless “society” has prompted central banks to consider issuing currency in digital form, known as “sovereign digital currencies” or “central bank digital currencies” (CBDCs). This issue has  increased the interest of policymakers and scientific communities in digital currencies of the central bank. The introduction of Central Bank Digital Currencies will mark the beginning of a new monetary era. A recent survey found that central banks representing a fifth of the world's population are likely to issue a CBDC "very soon," while 80 percent of central banks worldwide are considering issuing a CBDC.On the other hand, the COVID-19 pandemic has raised public concerns about the transmission of the virus through cash, thus increasing calls for the development of contactless payment methods such as CBDC.In general, one of the main goals of CBDC is to increase access to central bank reserves beyond the small territory of commercial banks for the general public; a concept sometimes referred to as "reserves for all". Therefore, cash will no longer be the only form of central bank money through which people can trade and save; rather, these things can be done with the reserves deposited in the central bank.CBDCs can reduce costs. They can be provided through digital wallets on mobile devices, reducing the costs associated with maintaining physical bank accounts and transaction fees. CBDCs may also lower the price of cross-border (and possibly domestic) payments by reducing intermediaries in the normal transaction chain through closer connectivity or direct access to central bank clearing accounts.The central bank's digital currencies can increase the resilience of the economy against shocks by increasing the efficiency of the payment system. However, its incorrect implementation may lead to increased systematic risks that reduce resilience. Therefore, the basic and safe design and implementation of the central bank's digital currency is important to maintain the resilience of the economy against shocks.According to the above, the main motivation of the present study is to explore the effect of the central bank's digital currency expansion on the resilience of Iran's economy using a dynamic stochastic general equilibrium model.

In this paper, a dynamic stochastic general equilibrium model was presented and estimated using the Bayesian approach and seasonal data in the period of 03.20.2004-06.22.2022.The parameters of the model are estimated using the Bayesian approach and the Random Walk Metropolis-Hastings algorithm. In this regard, the data of the observable variables of the model include seasonally adjusted data of GDP with and without oil, consumption expenditures, investment expenditures, government expenditures, foreign reserves of the central bank, consumer price index, and the growth rate of money has been used.

The results of the Markov Chain Monte Carlo diagnostic test of Brooks and Gelman (1989) showed that the parameter estimates are appropriate and reliable. The results showed that the increase in CBDC issuance causes an increase in the interest rate and a decrease in the real interest rate, which reduces the demand for cash, and increases the GDP, employment hours, and economic growth. This part of the results of the current research is consistent and similar with the results of Varshosaz et al. (2021), and Sokooti et al. (2022). The increase in production led to a decrease in inflation and an increase in the real exchange rate and foreign reserves of the central bank. This part of the results of the present study was consistent and similar to the results of the study of Barrdear and Kumhof (2022). Furthermore, considering the increase in transparency in the economy and the decrease in transaction costs, consumption expenditures and investment expenditures increased; and government spending and the ratio of government budget deficit to GDP decreased.In this research, following Briguglio and Galea (2003) and Farrugia (2007), the components of the central bank's foreign reserves, the ratio of government budget deficit to GDP, and inflation were used to analyze economic resilience:The reduction of inflation and the ratio of government budget deficit to GDP, and on the other hand, the increase of foreign reserves of the central bank, have led to an increase in economic resilience.

Policy recommendations: 

According to the results of the estimation of the model, it is suggested that the government, as a monetary authority, manage its expenses by issuing CBDC and thereby reduce the budget deficit. On the other hand, with the release of this type of currency and increased transparency in the economy, as an expansion policy, the requirements and circumstances will be created to increase economic growth.Declaration of Competing Interest: The authors have no conflicts of interest  to declare that are relevant to the content of this article.Acknowledgments: We thank anonymous reviewers for their useful comments greatly contributing to improving our work.JEL Classifications: C11, E31, E58.

Improving health has become a significant societal priority because, as a component of human capital, it improves the ability, efficiency, and quality of life of the labor force (Wu et al, 2021). Moreover, human capital accumulation is a primary determinant of economic growth through its impact on productivity (Jude et al, 2015). Based on this, it is possible to establish a relationship between economic growth and the accumulation of human capital through health. Health is multifaceted and no single variable defines it, but in most studies, life expectancy at birth, death rate of children under 5 years old, and vaccination rate are calculated in most studies (Arora, 2001). Past studies mainly suggest three results to reveal the effect of health on economic growth; The first group shows a positive effect (Li & Huang, 2009 and Shen et al., 2020), the second group shows a negative relationship (Jude et al., 2015; Tobing & Jeng, 2012 and Wang et al., 2019), and the third group shows no relationship (Mehrara, 2011) between these two indicators. On the other hand, some studies analyze this relationship with combined data and the results provide different results depending on the different groups of the statistical population (Acemoglu & Johnson, 2007; Jude et al., 2015 and Wang, 2011). Environmental degradation is one of the negative consequences of economic growth (Destek & Aslan, 2020; Ehigiamusoe et al., 2019; Ehigiamusoe et al., 2020; Mohsin et al., 2021 and Usman et al., 2020). The widespread consumption of fossil fuels and the emission of carbon dioxide CO2 is one of the concerns of researchers and environmental stakeholders, and it has caused them to provide solutions to deal with environmental problems (Acosta Castellanos et al., 2020; Ehigiamusoe et al., 2019 and Ehigiamusoe et al., 2020). Recently, there has been a relatively large literature on climate change or environmental degradation, in which various indicators have been used in the analyses. Emission of greenhouse gases is of fundamental importance among these different indicators (Rafique et al., 2022). However, studies have mostly used CO2 emissions as a proxy for environmental degradation; Because the emission of CO2 has the highest share in the emission of greenhouse gases. The review of theoretical and empirical studies shows that the role of health improvement on economic growth and environmental quality has not been investigated simultaneously. Therefore, the current research has used a dynamic stochastic general equilibrium model with the aim of understanding the effect of positive health shock on economic growth and environmental quality. The main contribution of this paper to existing studies is formed in three sections. 1) This paper examines the effect of health improvement shock on economic growth and environmental quality in Iran, which, according to the authors' knowledge, has not yet been studied. 2) This paper will be especially useful for Iranian policy makers and provide necessary understanding for other developing countries. 3) Considering the short-term improvement of environmental quality in the face of positive health shock, this article offers a recommendation to move towards sustainable development.

In this paper, a dynamic stochastic general equilibrium model is presented and estimated using the Bayesian approach and seasonal data in the period of 2001:3-2022:4. In this regard, the studied Dynamic Stochastic General Equilibrium (DSGE) model includes households with an unlimited planning horizon, a representative firm producing a homogeneous final product in a perfectly competitive environment, the government, the environment sector, and the oil sector. In order to estimate model parameters, Bayesian method and Random Walk Metropolis-Hastings algorithm (RW-MH algorithm) were used. The data of the observable variables of the model include seasonally adjusted data of Gross Domestic Production (GDP), private consumption, investment and the government expenses; which have been detrended using the Hodrick-Prescott filter. Brooks and Gelman (1998) diagnostic test and Monte Carlo Markov chain show that the parameter estimation is appropriate and reliable. This test shows three parameters, interval, second order moment (m2) and third order moment (m3). After extracting these Markov chains of parameters using Metropolis Hastings algorithm, the degree of accuracy of the chains was tested. According to the results of this test, the intra-chain and inter-chain variance of all parameters have finally converged. Therefore, the Bayesian estimation results have good accuracy.

Figure 4 shows how the model variables respond to a positive health shock. After the shock, the return on health investment increased, and after that, health expenses and exercise hours experienced a significant increase. Due to the increase in the hours of exercise, the working time is reduced and the health status is improved. The complementary relationship between capital and labor in the production function reduces the marginal productivity of capital, investment and production. A decrease in income will lead to a decrease in consumption, but the decrease in consumption and production is very small due to the re-optimization of the household towards a better health status. Investment follows a behavior similar to consumption behavior and faces a decrease. With the passage of time, the lack of physical capital causes an increase in interest rates, physical investment and working hours, and finally, they return to their previous stable level. The initial decline in GDP will follow the initial decline in economic growth; Also, the decrease in GDP leads to reduction of pollution and improvement of environmental quality in the short term.

In general, a positive health shock caused by increasing the productivity of health investment leads to the improvement of health sector variables. On the other hand, this shock causes the macroeconomic variables to decrease in the short term. Also, environmental variables will have a more suitable situation in the short term when faced with a positive health shock. The results of this article are consistent and similar with the results of the studies of Grossman (2000), Vasilev (2017) and Torój (2013). Considering the results of the model estimation and the importance of the role of health in the growth of Iran's economy and environmental quality, it is recommended that: 1) health expenditures be explained as a long-term investment in the economy; 2) using clean technologies to achieve sustainable development; 3) The use of renewable energies instead of fossil fuels should be put on the agenda.

From a macroeconomic perspective, human capital accumulation improves labor productivity, facilitates technological innovation, and increases the return on capital. Also, human capital makes growth more stable, which in turn leads to poverty reduction. In other words, human capital at the macro level is considered as a key production factor in the production function at the economic level. Education expenditure is very crucial for the formation of human capital and as a result economic growth; Because by reducing education costs, it increases the demand for education and plays an important role in increasing its quality. Therefore, the formation of human capital is an important factor for growth. Regardless of the contribution of education in sustainable economic growth, education is a consumer goods that directly contributes to people's welfare. Based on this, the United Nations Development Programme mentions education as one of the key components of human development index. For this reason, governments make significant investments in education. Considering the importance of the role of public education expenditure in the formation of human capital, the main goal of this study is to understand the effect of shocks to the government expenditure in the education sector on Iran's economy. In this regard, according to the characteristics of dynamic stochastic general equilibrium (DSGE) models in estimating the effects of shocks on the economy, a DSGE model suitable for the structure of Iran's economy and the Bayesian approach has been used.

In this paper, a dynamic stochastic general equilibrium model is presented and estimated using the Bayesian approach and seasonal data in the period of 2004:4-2021:5. The primary core of the current research is designed based on the Angelopoulos etal (2009) and by expanding this model, the effect of shocks to the government expenditure in the education sector on the Iran's economy has been investigated. In this regard, the studied DSGE model includes households with an unlimited planning horizon, a representative firm producing a homogeneous final product in a perfectly competitive environment, the firms that produce intermediate goods, the government, and the oil sector. There are (j) firms producing intermediate goods that produce heterogeneous good and imperfect substitutes under conditions of monopolistic competition. Intermediate goods are combined with each other by the firm producing the final goods under a Dixit-Stiglitz accumulator and presented to the household as the final goods. In order to estimate model parameters, Bayesian method and Random Walk Metropolis-Hastings algorithm were used. The data of the observable variables of the model include seasonally adjusted data of Gross Domestic Production (GDP), private consumption, investment and the gross growth rate of money; which have been detrended using the Hodrick-Prescott filter.Brooks and Gelman (1998) diagnostic test and Monte Carlo Markov chain show that the parameter estimation is appropriate and reliable. This test shows three parameters, interval, second order moment (m2) and third order moment (m3). After extracting these Markov chains of parameters using Metropolis Hastings algorithm, the degree of accuracy of the chains was tested. According to the results of this test, the intra-chain and inter-chain variance of all parameters have finally converged. Therefore, the Bayesian estimation results have good accuracy.

An increase in public education expenses by one standard deviation has caused an increase in private education expenses. Because private and public education expenses complement each other and entered the model in the form of a Cobb-Douglas function. Therefore, in general, investment in education and subsequently, human capital has increased. Increasing human capital has increased production, economic growth and reduced inflation. The decrease in inflation has led to an increase in the real wages of the workforce and finally the desire of the household to increase the supply of labor. An increase in real wages has led to an increase in consumption. Also, the increase in labor supply has increased the final productivity of physical capital, which is due to the complementarity of labor and capital in the Cobb-Douglas production function. This causes an increase in physical investment. The behavior of investment is very similar to the behavior of consumption and production, but its changes are more intense compared to other expenses; Because investment expenses are naturally more volatile than other expenses. Finally, due to the decrease in inflation, the real exchange rate has decreased. The results of this research are consistent and similar with the results of Angelopoulos et al. (2009), and are not similar to the results of Akbarian and Phamkar's (2009).

As a general result, it can be said that the shocks to the public education expenditure, such as the expansionary policy, have affected the performance of the economy and improved the economic conditions. It is suggested that public education expenditure be explained as a long-term investment in the economy. Also, the training of human resources according to the needs of the labor market should be put on the agenda.

Commodities are very important as production inputs and raw materials in industrial and agricultural productions as well as for providing basic needs in different countries. The global price shocks of commodities affect business cycle fluctuations of countries and their spillover effects on key macroeconomic variables such as inflation, production, and exchange rate. So, many researchers and policymakers in recent years, especially in the era of COVID-19 and the war between Ukraine and Russia, emphasize this issue. In the first step, global prices increase domestic inflation through increasing the price of food imports and then increasing the cost of household consumption basket. In the next step, the real sectors of the economy are affected, and macroeconomic balance disruption appears through various channels, such as trade sector, financial systems and investment. Note that the variation of production depends on the economic structure, the size of the economy and country's openness degree of trade. Although macroeconomic variables such as inflation and production are influenced by global price shocks, it is difficult to measure their impulses. So, in this study, the impact of global commodity prices (oil and foods) on Iran's economy is examined with the dynamic DSGE approach.

This research investigates the effects of global commodity (oil and foods) prices on Iran's macroeconomic variables (such as inflation, production, consumption and employment) with an emphasis on the food sector during the period of 2001-2021. For this purpose, the effect of global price shocks on inflation and growth (based on the impulse response function) is presented via the DSGE approach. So, The main variables of this study include oil price (OILP), world food price (WFP), real exchange rate (REER), wholesale price index (WPI) and domestic food price index (FOODP). In this study, a two-country DSGE model is designed with an emphasis on the country that exports oil and imports food. The model is designed in such a way that the impulses on the supply and demand side of oil and food can be identified on the macroeconomic variables separately. In fact, the research model is set to follow Oladouni (2020) in the form of a two-country open stochastic dynamic general equilibrium model based on the new Keynesian perspective. This model involves households, firms (one final producer and three intermediate firms), foreign sectors (foreign firms and importers), the government and the central bank. The innovation of this research is that, in addition to endogenously considering oil production, it has investigated the other factors affecting the domestic inflation. In this model, it is assumed that the real GDP is followed in a random walk process, and equilibrium real interest rate and equilibrium real exchange rate are univariate time series models. The inflation rate is explained based on the new Keynesian Phillips curve.

Using the seasonal data of 2001-2021 and the Bayesian estimation technique, this study indicates that the changes in global food prices are an important factor in overall inflation as well as food inflation in the country. More precisely, the results show that, in the first step due to the increase in oil exports, the oil price impulse leads to an increase in the total production, employment and consumption temporarily, but, after a period, changes in the exchange rate lead to a decrease in exports of domestic goods and an increase in the import of intermediate goods. This finally causes a decrease in production and an increase in inflation, especially food inflation in the short term. However, in the long run, they converge to their equilibrium values. The important point in this situation is that the amount of consumption of tradable (imported) edible goods is reduced and replaced by non-tradable ones. The results also show that the global food price shock increases the price of tradable food products. An increase in the price of tradable food goods increases the price of non-tradable ones. Moreover, the decrease in money supply through the exchange rate channel leads to an increase in the demand for non-food tradable goods, their prices, and inflationary pressure. The poorer a country is, the greater the share of non-tradable food commodities in inflation, and the more the inflationary effects of a global food price shock.Conclusions and policy implications: It is clear that identifying the causes of inflation, especially food prices, is one of the key aspects of policy-making in order to deal with crises, as in a situation of war, disease or stagflation. As the results showed, global commodity prices, along with exchange rate changes, are transferred to the domestic economy and affect the macroeconomic variables such as inflation and output after about three months. So, it will be important for the government to control the inflation and make efforts to provide enough food products, considering the 3-month opportunity before the shock. In this regard, it is suggested that, to control inflation at least in a short term in the field of trading inputs and agricultural products, some instruments should be used to limit their export. In addition, it is suggested that, in long-term planning, the monetary and banking laws of the country be reformed and the government's dominance over the monetary policy be reduced, thus reducing the negative effects on the real sector.

The COVID-19 pandemic severely contracted Iran's economy in 2019-2021. Mass vaccinations in Iran, which began in February 2021, gradually made expectations for the future optimistic and increased investment incentives. Considering the importance of this issue, the main goal of the present study is to understand the effect of shock to the marginal efficiency of investment on Iran's economy. Also, considering that since the great recession of 2007, the macroeconomic effects of government expenditures shocks have received more attention, one of the other goals of this study is to investigate the effects of government expenditures shocks and the crowding out effect in Iran's economy. In other words, since the scientific analysis of the effect of economic shocks on economic conditions is essential, the main goal of this article is to understand the effects of shocks on the marginal efficiency of investment and government expenditures on the dynamics of macroeconomic variables in Iran. Dynamic Stochastic General Equilibrium (DSGE) modeling is a branch of macroeconomics that follows the principles of microeconomics and can optimally evaluate the performance of the economy in a stochastic environment. These models are a new version of general equilibrium that emerged following Lucas' criticism. Compared to the models based on time series, DSGE models can show detailed interactions between market decision makers in the framework of general equilibrium. On the other hand, most time series models are not based on economic theory and unlike DSGE models, they are not based on mathematical optimization. Also, unlike calculable general equilibrium models, DSGE models are in a stochastic environment, and since the duration of the shock and its effect on the economy is not known, it is more appropriate to use DSGE models. Considering that the shocks on the economy are stochastic, dynamic stochastic general equilibrium models can best evaluate the effects of these shocks. In this article, a dynamic stochastic general equilibrium model is presented and estimated using the Bayesian approach and seasonal data in the period of 2001:3-2021:3. The primary core of the current research is designed based on the study of Rohe (2012) and by expanding this model, the effect of shock to the marginal efficiency of investment on the dynamics of the macroeconomic variables of Iran has been investigated. In this regard, the studied DSGE model includes households with an unlimited planning horizon, a representative firm producing a homogeneous final product in a perfectly competitive environment, the government, and the oil sector. In order to estimate model indices, Bayesian method and Random Walk Metropolis-Hastings algorithm were used. The data of the observable variables of the model include seasonally adjusted data of Gross Domestic Production (GDP), private consumption, investment and government expenditure; which have been detrended using the Hodrick-Prescott filter. The results indicate that the productivity shock caused an increase in the marginal efficiency of investment and production, and subsequently the hours of employment and investment increased; This caused the interest rate to increase. Due to the increase in household income, consumption increased. The response of the variables to productivity shocks and marginal efficiency of investment are very similar. The only difference is the response of consumption to the shock of the marginal efficiency of investment. As a result of this shock, consumption decreased due to the decrease in wage rates and household income. Also, the dependence of marginal efficiency of investment shocks and government expenditures led to an increase in government expenditures as a result of the marginal efficiency of investment shock. The shock of increasing government expenditures caused an increase in the real interest rate and a decrease in investment. Also, production and employment increased in response to this shock. Due to the significant decrease in the wage rate, consumption has decreased. Since the increase in government expenditures has led to a decrease in investment, the crowding out effect in Iran's economy is confirmed. Comparing the effects of shock to the marginal efficiency of investment and government spending shock on the dynamics of macroeconomic variables in Iran indicates that both shocks lead to an increase in output; but the government expenditures shock has led to the shrinking of the private sector in Iran. As a policy recommendation, it is suggested that the government should manage the political and economic environment of the country in a way so that the expectations of economic agents are formed as optimistically as possible. Also, considering the confirmation of the crowding out effect in Iran's economy, the government should prioritize the goal of reducing its size and expenses.

The main purpose of the study is to investigate the effect of global food price fluctuations on Iran's domestic inflation using structural VAR models and dynamic stochastic general equilibrium model based on seasonal data of 1380-1400. The results of the research based on the structural VAR model indicate that the global food price is the Granger causality of Iran's domestic food price and also the wholesale price index (inflation index). Also, based on the impulse response functions of the DSGE model, the above conclusion is confirmed the transmission effect. In other word, the changes in the global food prices are transmitted to Iran's inflation after a break of about three months (one season). Therefore, a large part of inflation changes in the country is caused by supply pressure shocks and global food price shocks. In this case, in order to reduce the impact of global price shocks on domestic inflation, the negative effects of global shocks on the real sector can be reduced in the short term program through policies to encourage food production and reduce food imports.

The trade-off between inflation and the output gap is different under each of the specifications of the Phillips curve, and therefore the optimal monetary policy will be different based on the assumption of each of these specifications. Considering the importance of the issue, and in order to identify the Phillips curve compatible with the stylized facts in the Iranian economy, by implementing the framework of the Dynamic Stochastic General Equilibrium (DSGE) model and Bayesian analysis, a wide range of pricing models including sticky information, Dual-stickiness, generalized Calvo, multi-sector and hybrid models have been compared and evaluated. To compare different pricing models in this study, four criteria have been applied: comparing the posterior probability of the models, comparing the moments of the simulated data of the model with real data, comparing the autocorrelation of the real inflation rate with the median of the posterior distribution of each of the models, and examining the impulse response functions. According to the results, the Phillips curve under Dual Stickiness is more consistent and compatible with the stylized facts in Iran's economy, compared with other Phillips specifications. In specifying the Phillips curve under Dual Stickiness, in addition to the expected inflation component, the lag of inflation also appears endogenous (due to the simultaneous assumption of two types of price and information stickiness).

The present study represents an attempt to examine the main macro determinants of stock prices in OPEC oil exporting and importing countries in the study period 1996 to 2016 using Bayesian model averaging (BMA). The oil importers in this study are the United States, Britain and Japan, and three countries, Iran, Saudi Arabia and Kuwait, have been selected as oil exporters. The findings of this study are that to predict and evaluate the stock price index for oil-importing countries, the three variables of exchange rate index, consumer price index and economic growth should be given more importance than other variables, while for oil-exporting countries, The three variables of broad money growth, exchange rate and import are the most important variables that should be considered. For oil-importing countries, among the macro variables studied, OPEC oil prices have a completely negative relationship with the stock price index of those countries, but in oil-importing countries, the gold price has a completely inverse relationship with the stock price index.

The present study attempts to analyze the effect of the financial accelerator component on the business cycles of the Iranian economy by considering the financial friction in the process of obtaining bank loans. In addition, the inclusion of banks chr('39')capital adequacy ratio in the model enters the role of bankschr('39') balance sheets in the occurrence of financial friction in the Iranian economy. Weak credit rating of bank customers in Iran makes it possible to use a document-based approach to properly understand the financial friction in the credit system, instead of using the inspection algorithm of lending banks and covering their costs through different interest rates. For this purpose, a dynamic stochastic general equilibrium model (DSGE) is designed in accordance with the structural features of the Iranian economy, and is estimated using the Bayesian approach and seasonal data in the period 2009-2020. The results indicate that taking the financial sector into account leads to a more accurate understanding of the fluctuations of business cycles in the Iranian economy. This is determined by comparing the instantaneous reaction functions of the main variables of the model in two scenarios with different degrees of financial friction. The results of the study also show that the changes due to the financial accelerator component in the impact of monetary shocks and productivity are more noticeable than other shocks.

One of the most attractive fields of research in applied macroeconomics is identifying the role of different shocks in business cycles. After the recent financial crisis (2007-2008), more attention has been drawn to the financial sector to explain economic fluctuations. In this study, we examine the role of financial shocks (loan supply shock, housing price shock, and stock market shock) alongside the real and monetary shocks (aggregate supply, aggregate demand, monetary policy, and investment shocks) in Iran’s business cycles. We use the sign restrictions VAR model in order to identify different shocks structurally. Two models have been estimated using the Bayesian method and seasonal data over the time period 1370:1- 1395:4 (1991:2-2017:1). The findings indicate that the financial shocks, especially the loan supply shock, are of great importance in explaining the fluctuations of the real economy. In addition, our results show that the role of financial shock is more significant in explaining the recent recession of Iran’s economy.

This paper study the effectiveness of the monetary policy with respect to the time structure of interest rates, which could play a role in the monetary policy transmission mechanism, on economic variables including production, inflation, money and bond yields. To do this, we used the Dynamic Stochastic General Equilibrium model of bond yields Zagaglia (2009), where long-term interest rates are an integral part of the monetary transmission mechanism. The model is estimated with the Bayesian method on Iran’s data for the period of 1991-2 to 2017-1. To evaluate the accuracy of this model, simulated data moments were compared with real data moments. Analyzing the Variance Decomposition shows that changes in the product are explained by technology shock, bond supply shock, and monetary policy shock. Analyzing the Impulse Responses of the model shows that the monetary policy shock, as well as changes in the money demand and bonds supply, could explain the movements in long-term interest rates.

The aim of this paper is to analyzing the persistency of inflation in Iran by using a general approach, with the goal of providing a plausible and acceptable explanation. For this, the inflation rate of Iran in period 1937-2016 and on the base of fractionally integrated (FI) approach was modeled and in the later phase inflation memory parameter has been estimated by using classic methods (the Geweke and Porter-Hudak semi parametric method nonlinear least squares, exact maximum likelihood, and a minimum distance estimator) and Bayesian methods. The results of the estimation in both methods show that the inflation rate in Iran is stable. Stability of inflation rates has important implications for policy-making, especially monetary policy, so that due to the impact of economic shocks on inflation, its effects will be last for a long time. Therefore, it is necessary to policy makers identify the major sources of distorting inflation, including dependence on oil resources, no attention to the role and function of the reserve fund, the government budget deficit, central bank dependence and the existence of structural problems and consider appropriate approaches in this field.

In an open economy, the exchange rate is an important factor in the design of monetary policy. The nominal exchange rate may serve as the underlying objective of monetary policy in the short to medium term in its capacity as an intermediate target. The real exchange rate is of concern to policymakers not least because of its importance in determining the competitiveness of domestic goods in global markets, but because of its role as the driving force behind the expenditure switching effect. Many of studies also show that the real exchange rate directly affects behavior on the production side of the economy.
This paper underscores the importance of the direct exchange rate channel in the transmission of monetary policy effects in an open economy forward looking model. In fact, we study the impact of exchange rate shock on macroeconomic variables such as inflation and output in the context of incomplete exchange rate pass-through, using a new Keynesian dynamic stochastic general equilibrium (DSGE) model with microeconomic foundations for a small open economy, adjusted for Iran. DSGE models as one of the major developments in macroeconomics in the past few decades are based on the adoption of the inter-temporal utility maximization paradigm.
In our model, we assume that there are two economies. On the one hand, there is the domestic economy, designated as a small and open economy, and on the other hand, there is a foreign economy, considered considerably bigger compared to the domestic one and relatively closed. These features influence their mutual relations and it holds that the domestic economy does not influence the development in the foreign economy. In this paper, we model relations for the development in the domestic economy, and the rest of the world, i.e. the foreign economy, enters the model exogenously. In our model, it is assumed that the Central Bank minimizes a loss function, taking into account the deviation of inflation from its target, output stabilization. In addition, incomplete exchange rate pass-through has been considered by the means of nominal import price rigidity and modelling of the path which exchange rate changes affect the economy.
In line with our purpose, two kinds of policies based on discretion and commitment are introduced into the model. Period by period optimization and the treatment of expectations as being fixed characterize discretionary policymaking in the forward looking framework. The first characteristic implies that the policymaker sets policy anew every period. The other characteristic suggests that the policymaker treats the expectations of agents as constants when re-optimizing every period. But Commitment implies that the policymaker follows a rule systematically. In view of the fact that the policymaker cares about deviations of inflation from target and deviations of the real output gap from its target level, the policy rule focuses on the two target variables.
Bayesian methods have been applied in order to estimate structural parameters of the model. To do so, we have used Central Bank's data during 1369-1393. Then, the model is simulated under two policies of discretion and commitment and the effect of exchange rate shocks on key economic variables in these two situations is compared.
The results of the research indicate that the initial effect of exchange rate shock on all variables is roughly the same in both scenarios, but in discretion mode it takes more time to regain long-term balance. Our analysis also reveals that the output-inflation trade-off is more favorable under commitment than under discretion in part because of the existence of the direct exchange rate channel, and the stabilization bias under discretion is weaker in an open economy relative to a closed economy. These results confirm the importance of the exchange rate in the design and implement of monetary policy.
This paper underscores the importance of the direct exchange rate channel in the transmission of monetary policy effects in an open economy forward looking model. In fact, we study the impact of exchange rate shock on macroeconomic variables such as inflation and output in the context of incomplete exchange rate pass-through, using a new Keynesian dynamic stochastic general equilibrium (DSGE) model with microeconomic foundations for a small open economy, adjusted for Iran. DSGE models as one of the major developments in macroeconomics in the past few decades are based on the adoption of the inter-temporal utility maximization paradigm.
In our model, we assume that there are two economies. On the one hand, there is the domestic economy, designated as a small and open economy, and on the other hand, there is a foreign economy, considered considerably bigger compared to the domestic one and relatively closed. These features influence their mutual relations and it holds that the domestic economy does not influence the development in the foreign economy. In this paper, we model relations for the development in the domestic economy, and the rest of the world, i.e. the foreign economy, enters the model exogenously. In our model, it is assumed that the Central Bank minimizes a loss function, taking into account the deviation of inflation from its target, output stabilization. In addition, incomplete exchange rate pass-through has been considered by the means of nominal import price rigidity and modelling of the path which exchange rate changes affect the economy.
In line with our purpose, two kinds of policies based on discretion and commitment are introduced into the model. Period by period optimization and the treatment of expectations as being fixed characterize discretionary policymaking in the forward looking framework. The first characteristic implies that the policymaker sets policy anew every period. The other characteristic suggests that the policymaker treats the expectations of agents as constants when re-optimizing every period. But Commitment implies that the policymaker follows a rule systematically. In view of the fact that the policymaker cares about deviations of inflation from target and deviations of the real output gap from its target level, the policy rule focuses on the two target variables.
Bayesian methods have been applied in order to estimate structural parameters of the model. To do so, we have used Central Bank's data during 1369-1393. Then, the model is simulated under two policies of discretion and commitment and the effect of exchange rate shocks on key economic variables in these two situations is compared.
The results of the research indicate that the initial effect of exchange rate shock on all variables is roughly the same in both scenarios, but in discretion mode it takes more time to regain long-term balance. Our analysis also reveals that the output-inflation trade-off is more favorable under commitment than under discretion in part because of the existence of the direct exchange rate channel, and the stabilization bias under discretion is weaker in an open economy relative to a closed economy. These results confirm the importance of the exchange rate in the design and implement of monetary policy.

Iranian banks can not freely determine their interest rates in the financial market. This characteristic causes banking industry unable to perform their duties of financial intermediaries in the transmission mechanism of monetary. In these circumstances، monetary shocks will have a significant and high effect on the alternative markets (like stocks and housing). In this study، we used dynamic stochastic general equilibrium models (DSGE). We will examine what would happen if banks can adjust their interest rates. The results show that economic variables are more sensitive to free interest rates on loans compared to deposits interest rates. However، if banks are free to determine the interest rate on loans، monetary shocks lead to less volatility in real variables (output، employment، investment)، and more volatility in inflation and other nominal variables.