Effect of Oil Shocks on Business Cycle in the Iran's Economic Using the Markov-Switching model (1988: 2-2014: 4)

The oil price shocks are one of the main sources of economic fluctuations in oil producing countries. The role of oil shocks as factors in economic growth of a country is important. The aim of this study is to investigate the effect of oil price shocks on business cycle in Iran by using a Markov Switching approach during the seasonal period of 1988(2)_2014(4). The results of Markov Switching model indicate that oil price fluctuations has had a positive impact on business cycle during the boom period and it has had a negative impact on business cycle during recission period and the stability of the two regimes is roughly equal and close together. The results also show that Iran's economy has experienced 52 recession seasons and 50 seasons of boom in the period under consideration that, on average, we can say the length of the recession and the boom was equal.