MONETARY POLICY AND STOCK PRICE INDEX IN DSGE MODELS FRAMEWORK

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BAYAT MARZEYEH; AFSHARI ZAHRA; TAVAKOLIAN HOSSEIN

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Journal: Journal of Economic Research and Policies Year:2016 | Volume:24 | Issue:78 Page(s): 171-206

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Title

MONETARY POLICY AND STOCK PRICE INDEX IN DSGE MODELS FRAMEWORK

Author(s)

BAYAT MARZEYEH | AFSHARI ZAHRA | TAVAKOLIAN HOSSEIN | Issue Writer Certificate

Keywords

STOCK PRICE INDEXQ2

RULE OF MONETARY POLICYQ1

DYNAMIC STOCHASTIC GENERAL EQUILIBRIUM MODELQ1

Abstract

In this research, a dynamic stochastic general equilibrium (DSGE) model was designed to study the behavior of the central bank in financial instability condition with considering some facts observed in the economy of Iran. Then after optimization and obtaining first-order conditions of brokers using Uhlig method linear-logarithmic form of the equations was obtained. In the end, variables impulse response functions in against the technology shock, oil revenues shock, the monetary shock consumer spending and investment the government shock and STOCK PRICE INDEX shock was evaluated under two central bank scenarios. the first scenario, central bank only reacts to production and inflation gap and in The second scenario, central bank reacts to STOCK PRICE INDEX gap in addition to production and inflation gap. The results of the calibration of linear model suggest that in case of technology shock, monetary shocks, and government spending shock under both scenarios, fluctuations of intermediate agents, private investment, inflation, production, and money volume growth do not show significant differences. However, under the second scenario, in case of government investment shock and oil revenues shock,, there is less fluctuation in the discussed variables compared to the first scenario. but under the second scenario, in case of STOCK PRICE INDEX Shock, there is more fluctuation in the discussed variables compared to the first scenario. Therefore, the results of the impulse response function (IRF) of the variables suggest that the mild reaction of the central bank to deviations of total STOCK PRICE INDEX from it equilibrium leads to a reduction in economic volatility and an increase in in overall macroeconomic stability. Moreover, comparison of the torque of the variables present in the model and torque of real data of Iran economy indicates the relative success of the model in simulating the realities of Iran economy.

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APA: Copy

BAYAT, MARZEYEH, AFSHARI, ZAHRA, & TAVAKOLIAN, HOSSEIN. (2016). MONETARY POLICY AND STOCK PRICE INDEX IN DSGE MODELS FRAMEWORK. JOURNAL OF ECONOMIC RESEARCH AND POLICIES, 24(78), 171-206. SID. https://sid.ir/paper/89467/en

Vancouver: Copy

BAYAT MARZEYEH, AFSHARI ZAHRA, TAVAKOLIAN HOSSEIN. MONETARY POLICY AND STOCK PRICE INDEX IN DSGE MODELS FRAMEWORK. JOURNAL OF ECONOMIC RESEARCH AND POLICIES[Internet]. 2016;24(78):171-206. Available from: https://sid.ir/paper/89467/en

IEEE: Copy

MARZEYEH BAYAT, ZAHRA AFSHARI, and HOSSEIN TAVAKOLIAN, “MONETARY POLICY AND STOCK PRICE INDEX IN DSGE MODELS FRAMEWORK,” JOURNAL OF ECONOMIC RESEARCH AND POLICIES, vol. 24, no. 78, pp. 171–206, 2016, [Online]. Available: https://sid.ir/paper/89467/en

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