Comparison of the Effects of Exogenous Impulses on Iran's Business Cycle under Environmental Policies

Mahtab Mehrjoo Irani, Mohammad Ali Falahi and Narges Salehnia
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Mahtab Mehrjoo Irani: Ph.D. Student in Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran
Mohammad Ali Falahi: Professor in Economics Department, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran

Quarterly Journal of Applied Theories of Economics, 2025, vol. 12, issue 1, 49-70

Abstract: Environmental protection, as one of the Millennium development goals, requires the intervention of policymakers and the implementation of environmental policies to limit the emission of greenhouse gases. This research investigates the consequences of implementing environmental policies on economic variables (including consumption, production, and investment) in Iran's economy from 1978 to 2017. For this purpose, the Dynamic Stochastic General Equilibrium (DSGE) method was used to analyze a closed economy model with the approach of real business cycles. The source of fluctuations in the economy is the momentum of the total productivity of production factors and the momentum of energy prices. Also, the capital is not fully used in the production process. The simulation results show: 1. During the positive momentum of productivity, the emission cap policy has the best performance in reducing the fluctuations of economic variables and greenhouse gas emissions. 2. During the positive momentum of energy prices, the emission cap policy and the emission intensity target policy show the best performance regarding the level and fluctuation of economic variables and pollution emissions.

Keywords: Environmental policies; productivity momentum; energy price momentum; DSGE model (search for similar items in EconPapers)
JEL-codes: C61 E32 Q54 (search for similar items in EconPapers)
Date: 2025
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