Fluctuations in Iran's GDP growth:Investigating Instability in Iran's GDP growth with MS-GARCH Model

Document Type : Scientific paper

Authors

1 Faculity Member, Payame Noor University

2 Assistant Professor of Economics, Department of Economics, Payame Noor University

3 Department of Economics, Payame Noor University, Tehran, Iran.

Abstract

Investigating the volatility and irregular fluctuations of business cycles is one of the most important issues in macroeconomic policy making. in previous models that have been examined, the real growth rate of the economy is constant, while the shocks that affect the real growth rate the changes in this state, which creates the variance and the stability state of the economy. It was not fixed.

In this study, using Markovian regime change in variance (MS-GARCH) models, the stability of fluctuations in different regimes governing the growth of Iran's real gross product with seasonal intervals for the years 1383:1-1399:4 has been investigated. the comparison between the models has been done using two features, RMSE and MAE.

The results indicate that the stability coefficient of the regime with high volatility (unstable) is equal to the stability coefficient with mild volatility (stable), and since the probability of entering a stable regime is 2.5 times higher than the probability of entering an unstable regime, therefore, macroeconomic policy makers should pay more attention to the consequences of the policies adopted due to the costs of exiting the recession. Because the desire to enter the stages of recession is not only much higher, but the persistence to remain in recession periods is also 4 times more than in boom periods.

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References

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Macroeconomics Research Letter
Volume 17, Issue 34
September 2022
Pages 39-59

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History

  • Receive Date: 28 January 2023
  • Revise Date: 07 April 2023
  • Accept Date: 25 April 2023

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