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The Analysis of Iran's Business Cycle of Residential Investment: A Dynamic Stochastic General Equilibrium Model.)DSGE
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Parvaneh Aslani *   |
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Abstract: (1129 Views) |
Housing Sector, with a considerable share in GDP and employment, is of great importance in Iran's economy. This is the case that due to the noncommercial and non-substitutable nature of this sector as well as the existence of high profit expectations in that, there have been considerable variations in this sector, especially as a result of oil revenue variations. However, Policymakers and planners regard it very important to examine the cycles in the variables related to this sector due to the existence of strong forward and backward linkages in housing sector. Hence, this study tries to examine the way housing sector variables in Iran are influenced by the variations in oil revenues, and for that, time series data spanning the period 1991:1-2007:4 are deployed in a Dynamic Stochastic General Equilibrium (DSGE) model including households, firms producing new residential houses, and the production of other economic firms aw well as oil sector. The model is based on some simplify assumptions suitable to Iran's economy characteristics as: 1- Iran as a small economy regarding capital flows; 2- no price stickiness in housing sector. The model is processed through using DYNAR (as a subset of MATLAB software package).
The result of simulations in the model showed that all variables in the model response to an oil shock impulse. This implies that Iran's economy is suffering from Dutch Disease. However, it is noteworthy that, although the resulting shocks in housing sector are all strong in the short term, the effect of which will dampen within a period of 8 quarters. This was also justified considering the compatibility of simulated variables' moments in housing sector with the real world. This shows how Dynamic Stochastic General Equilibrium model is able to explain the housing sector variables.
To finalize the study and considering the way cycles in economic variables are generated by the increase in commercial goods as well as the effect of a positive oil shock on housing sector prices compared with the price increase in other sectors, "commercial importees management after a positive oil shock", is strongly recommended. |
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| Keywords: Residential Investment, Dynamic Stochastic General Equilibrium Model, Two Sectors Model, Oils Shocks, Housing Price. |
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Full-Text [PDF 587 kb]
(247 Downloads)
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notification: Research |
Subject:
Special
Received: 2013/12/18 | Accepted: 2014/06/8 | Published: 2013/12/22
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