:: Volume 29, Issue 98 (Quarterly journal of economic research and policies 2021) ::
qjerp 2021, 29(98): 93-133 Back to browse issues page
Wage Stickiness Assessment in Iran’s Economy by Comparing DSGE Models
Elham Farnaghi , Zahra Afshari * , Hossein Tavakolian
Alzahra university , z.afshari@alzahra.ac.ir
Abstract:   (1695 Views)
Explaining economic stylized facts with general equilibrium models requires considering some assumptions about relationships that are as realistic as possible. Assumptions about nominal rigidities such as wage and price stickiness are the main principles of general equilibrium models that should be determined based on the agent's behavior in the studied case. This paper addresses the question of whether introducing the wage stickiness into the Iranian economic model can improve the model fitting. Also this paper is aimed to find out which price and wage adjustment models are more consistent with the stylized facts of the Iranian economy. In this order, we consider three alternatives for wage stickiness (model without wage stickiness, simple wage stickiness, and wage stickiness with indexation) and three models for price stickiness (Calvo with Indexation, Information Stickiness Model and Dual Price-Information Stickiness), and design 9 DSGE models based on these alternatives. Then we evaluate and compare DSGE models with three different benchmarks (Baysian Model Comparision, Impuls Response Function Comparision, and comparing the degree of inflation persistency). The results show that introducing wage stickiness in the models make the models more consistent with the stylized facts of the Iranian economy, including the inflation stability and inflation inertia. Also, considering the wage indexation in the models improves model performance based on the inflation persistency benchmark
Keywords: Wage rigidity, Nominal regidities, Calvo Pricing Model, Model Comparison
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Type of Study: Research | Subject: Special



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Volume 29, Issue 98 (Quarterly journal of economic research and policies 2021) Back to browse issues page