The Effects of Macroeconomic Shocks on Unemployment in Iran

The main purpose of this paper is to study the effects of macroeconomic shocks on unemployment rate in the context of the Iranian economy. To do so, we use a structural vector autoregressive (SVAR) model along with Impulse-Response Function and Variance Decomposition Method over the period 1966-2007. The overall results indicate that productivity and aggregate demand shocks have significant negative effects on unemployment rate in Iran; however, wage, price and labour supply shocks have significant positive effects on the independent variable in this study.