Measuring the impact of economic uncertainty impulse on macroeconomic variables: A Dynamic Stochastic General Equilibrium Approach

Document Type : RESEARCH PAPER

Authors

1 Assistant Professor, Department of Islamic Economics, Faculty of Economic and Administrative Sciences, University of Qom

2 Professor, Faculty of Economics, University of Tehran

Abstract

The purpose of this article was to measure the impact of the impulse caused by the uncertainty of monetary, financial and currency policies on macroeconomic variables in Iran. For this purpose, the statistical information of the period 1991-2022 was used based on the frequency of seasonally adjusted information. The uncertainty index of economic policies in this study was caused by monetary, financial and currency policy. In line with the modeling goal of this study, the dynamic stochastic general equilibrium method was used. In this study, the impulse of economic uncertainty in the behavior of the monetary authority and the government was included in the model. The results obtained from the impulse entered from the area of monetary policy uncertainty show that the variables of inflation rate, interest rate, exchange rate and production deviation have shown a positive reaction to this impulse, but other variables such as investment, employment, Government expenditures, tax revenues and consumption expenditures of the private sector showed a negative reaction. In the second part, the results obtained from the impulse entered from the area of financial policy uncertainty indicate that the variables of inflation rate, interest rate, exchange rate, government expenditure and production deviation have shown a positive reaction to this impulse, but other variables including Employment, taxes and consumption showed a negative reaction. Finally, in the third part, the results obtained from the impulse entered from the area of currency policy uncertainty show that the variables of inflation rate, interest rate, exchange rate and production deviation have a positive reaction to this impulse. But other variables such as investment, employment, government spending, tax and consumption showed a negative reaction.In this study, the shock of economic uncertainty through monetary, financial and currency policy has been included in the behavior of the monetary authority and the government in the model. The results obtained from this study indicated that the real variables of the economy such as investment, production, consumption, government spending and taxes have decreased in response to the shock of economic uncertainty, but the nominal variables such as the exchange rate, interest rate and inflation rate have decreased in response to Economic uncertainty shocks have increased. Based on the obtained results, the shock caused by economic uncertainty by affecting the behavior of economic agents in the households and companies sector has led to instability in optimization and its consequences have been observed on macroeconomic variables. Based on the obtained results, the shock caused by economic uncertainty by affecting the behavior of economic agents in the households and companies sector has led to instability in optimization and its consequences have been observed on macroeconomic variables.

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References

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Stable Economy Journal
Volume 4, Issue 3 - Serial Number 12
September 2023
Pages 106-133

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