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The Impact of Oil Shocks on the Iranian Economy: An Analysis Based on the DSGE Model with an Emphasis on Non-Ricardian Household Behavior
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Abboud Shahid   , Monireh Rafat * , Majid Sameti |
| Department of Economics, University of Isfahan , M.rafat@ase.ui.ac.ir |
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Abstract: (1 Views) |
| This study examines the effects of oil shocks caused by intensified oil sanctions, government spending shocks, tax shocks, and technology shocks on Iran’s macroeconomic variables, particularly output, consumption, and working hours, while considering the role of non-Ricardian consumers. To this end, a dynamic stochastic general equilibrium (DSGE) model is developed within a New Keynesian framework. The model includes Ricardian and non-Ricardian households, production firms, the foreign trade sector, the oil sector, the government, and the central bank. Its parameters are estimated using Bayesian methods and annual data for the period 2004–2023. The findings show that the presence of non-Ricardian consumers intensifies the negative effects of oil and tax shocks. In response to a negative oil price shock or a positive tax shock, consumption, output, and working hours decline more sharply. However, inflation reacts differently to these shocks: a negative oil price shock raises inflation, whereas a positive tax shock reduces inflation mainly through a decline in aggregate demand. Moreover, non-Ricardian households strengthen the effects of positive government spending shocks, leading to greater increases in consumption, output, and working hours, along with a more noticeable decline in inflation. Conversely, they weaken the positive effects of technology shocks, limiting growth in consumption and output. |
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| Keywords: Dynamic stochastic general equilibrium models, Iranian economy, New Keynesian approach, Non-Ricardian households, Oil shocks |
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Type of Study: Research |
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