The Effects of Energy Price Reform on Iranian Economy: Dynamic Stochastic General Equilibrium Approach (DSGE)

Hasan Farazmand (), Seyed Aziz Arman (), Seyed Morteza Afghah () and Mojtaba Ghorbannezhad ()
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Hasan Farazmand: Associate Professor in Economics, Shahid Chamran University of Ahvaz
Seyed Aziz Arman: Associate Professor in Economics, Shahid Chamran University of Ahvaz
Seyed Morteza Afghah: Assistant Professor in Economics, Shahid Chamran University of Ahvaz
Mojtaba Ghorbannezhad: Ph.D. Candidate in Economics, Shahid Chamran University of Ahvaz

Quarterly Journal of Applied Theories of Economics, 2016, vol. 3, issue 2, 49-76

Abstract: The aim of this study is to design a dynamic stochastic general equilibrium model with nominal and real rigidities to study the effects of energy price reform on macroeconomic in Iran. We tried to consider important mechanism of energy prices on the macroeconomic. In this regard, energy consumption in the household bundle is included as a separate commodity. Also, energy was considered as an input in the production function, so that, the mechanisms impact on both the supply and demand to be considered. Impulse response functions show that, an energy price shock (one standard deviation) led to decrease in production, lower private consumption and investment returns. Also, an oil price shock increases production, inflation, consumption and investment returns.

Keywords: Economic growth; Energy price reform; Inflation; DSGE model. (search for similar items in EconPapers)
JEL-codes: E31 E37 F43 Q43 (search for similar items in EconPapers)
Date: 2016
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