The Effects of Productivity shocks Shocks on Economic Growth in Iran

Identification of sources of disturbances in production and economic growth are amongst the most important macroeconomic discussions. There are fundamental differences between different economic schools with regard to factors creating business cycles. Research methodology of this paper is descriptive. It is based on the Iranian data for period of 1962-2005. To do this Tornvist index of total factors productivity has been in estimated. Then, using Blanchard- Quah method, temporary and permanent shocks have been decomposed. Results of study indicate that supply side shocks have significant effect on economic growth, and effects of demand side shocks on economic growth are transitory. Supply side shocks (productivity shocks) have accumulative effects on economic growth.