USING THE AGGREGATE DEMAND -AGGREGATE SUPPLY MODEL TO IDENTIFY SHORT-RUN AND LONG-RUN STRUCTURAL DEMAND-SIDE AND SUPPLY SHOCKS IN IRANIAN ECONOMY

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HOJABR KIANI KAMBIZ; GHAFARI FARHAD

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Journal: ECONOMIC RESEARCH REVIEW Year:2010 | Volume:10 | Issue:3 (38) Page(s): 87-116

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Title

USING THE AGGREGATE DEMAND -AGGREGATE SUPPLY MODEL TO IDENTIFY SHORT-RUN AND LONG-RUN STRUCTURAL DEMAND-SIDE AND SUPPLY SHOCKS IN IRANIAN ECONOMY

Author(s)

HOJABR KIANI KAMBIZ | GHAFARI FARHAD | Issue Writer Certificate

Keywords

IRANQ2

BUSINESS CYCLEQ2

AGGREGATE SUPPLYQ3

AGGREGATE DEMANDQ2

IRANIAN ECONOMYQ2

STRUCTURAL VECTOR AUTO REGRESSIVE MODELQ2

BLANCHARD & QUA CONSTRAINTQ3

Abstract

This paper aims to identify the main determinants contributing to BUSINESS CYCLEs in IRAN in short and long run. The paper tries to underpin the impulse response function of output to AGGREGATE SUPPLY and demand shocks. We use annual data from 1959 to 2006 to decompose the cycles from trend, implementing band pass frequency method with the approach of Baxter and King. Then we use Engel and Granger causality test to determine the causality relation between AGGREGATE DEMAND cycles and real GDP, with and without oil. To determine the structural shocks threatening the IRANian economy, we use a Structural VAR with the restrictions imposed in Blanchard and Quah's study. The result of our study indicates that oil revenues are one of the most important factors contributing to BUSINESS CYCLEs in IRAN.The results also suggest that the speed of adjustment of aggregate output to structural AGGREGATE SUPPLY and demand shocks varies depending on whether the shock originates from the supply or demand side. The shocks last for four to five years if it originates from the supply side and lasts for six to seven years if it originates from the demand side. In other words shocks originating from the demand side last longer compared with the supply shocks. The structural variance decomposition of forecast errors suggests that most of changes in aggregate output can be attributed to supply structural shocks, whereas most of changes in prices can be attributed to structural AGGREGATE DEMAND shocks.

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APA: Copy

HOJABR KIANI, KAMBIZ, & GHAFARI, FARHAD. (2010). USING THE AGGREGATE DEMAND -AGGREGATE SUPPLY MODEL TO IDENTIFY SHORT-RUN AND LONG-RUN STRUCTURAL DEMAND-SIDE AND SUPPLY SHOCKS IN IRANIAN ECONOMY. ECONOMIC RESEARCH REVIEW, 10(3 (38)), 87-116. SID. https://sid.ir/paper/67308/en

Vancouver: Copy

HOJABR KIANI KAMBIZ, GHAFARI FARHAD. USING THE AGGREGATE DEMAND -AGGREGATE SUPPLY MODEL TO IDENTIFY SHORT-RUN AND LONG-RUN STRUCTURAL DEMAND-SIDE AND SUPPLY SHOCKS IN IRANIAN ECONOMY. ECONOMIC RESEARCH REVIEW[Internet]. 2010;10(3 (38)):87-116. Available from: https://sid.ir/paper/67308/en

IEEE: Copy

KAMBIZ HOJABR KIANI, and FARHAD GHAFARI, “USING THE AGGREGATE DEMAND -AGGREGATE SUPPLY MODEL TO IDENTIFY SHORT-RUN AND LONG-RUN STRUCTURAL DEMAND-SIDE AND SUPPLY SHOCKS IN IRANIAN ECONOMY,” ECONOMIC RESEARCH REVIEW, vol. 10, no. 3 (38), pp. 87–116, 2010, [Online]. Available: https://sid.ir/paper/67308/en

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