Study real business cycles In Economy of Iran emphasize Production Gap

Proponents of real business cycles emphasize the roles played by employment and technological cycles in creation of these business cycles. This study attempts to examine the effects of these cycles on creation of business periods in Iran during 1959 – 2014 period. To this end, first target cycles were extracted via Hodrick–Prescott filter and then these cycles were analyzed by employing Markov switching multifractal model.The results revealed that business cycles in Iran were asymmetric in the studied period and booming cycles were stronger and longer compared to recession cycles. They also revealed that capital accumulation, employment and productivity cycles were dependent, leading and concurrent variables, all three favoring the business cycles.Hsiao's Granger causality test also showed that capital accumulation cycles and business cycles had mutual causality. However, business cycles had unilateral causal relationships with two other variables. Therefore, generally speaking, the research findings indicate the significance of supply side variables in production changes and highlight the importance of these three variables in managing business cycles.