Nominal GDP Targeting under Application of Dynamic Stochastic General Equilibrium (DSGE) models in Iran.

Document Type : Scientific paper

Authors

1 University of Tehran, Faculty of Economics

2 Ph.D. in Economics, Payam Nour University of Tehran

3 Tehran Payam Noor University, Faculty of Economics

4 No 14/1, Fl 3, Sadaf De. Alborz Qtr, Golshahr Sq, Elgholi Ave, Tabriz Ct

Abstract

Since the end of the Great Moderation period, there has been an increase in studies proposing alternatives to the current dominant monetary policy regime (inflation targeting). One of these popular alternatives is nominal GDP targeting. The current research empirically investigates the issue of nominal GDP targeting against other monetary policies such as inflation targeting (Taylor's laws) within the framework of a neo-Keynesian stochastic dynamic general equilibrium model. This model has been fitted through a combination of calibration and Bayesian estimation of parameters, using data from Iran during the seasonal period of 1370:1-1398:4. Therefore, at first, a new Keynesian (DSGE) model with investment adjustment costs, prices and real wage stickiness, public sector and imperfect competition, along with various shocks is designed and then with using Bayesian methods, we estimated and compared these models on the data of Iran. The results have shown that first; The impact of monetary policy shocks on the variables used in the models is in the same direction and the Central Bank of Iran reacts less aggressively to the increase in production and inflation rate than their steady state values. Secondly;The effectiveness of production variables and inflation rate from monetary shocks of nominal GDP targeting law is more than Taylor's law

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History

  • Receive Date: 24 June 2024
  • Revise Date: 18 November 2024
  • Accept Date: 04 December 2024

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