Investigating the Asymmetric Effects of Business Cycles on Consumption and Wealth Accumulation in Iran

Document Type : Scientific paper

Authors

1 Department of Theoretical Economics,, University of Mazandaran

2 Associate Professor in Energy Economics, University of Mazandaran

3 M.A. in Economics, University of Mazandaran,

10.22080/mrl.2025.28582.2156

Abstract

Production and its fluctuations are one of the factors affecting economic welfare. Business cycles, especially booms and busts, have a direct impact on welfare, and business cycles are intricately linked to consumption patterns during these periods. The relationship between booms and busts has a significant impact on wealth flows, capital movements, household wealth, and income inequality. The flow of consumption and the accumulation of wealth reflect the patterns of consumer behavior and capital storage. The country is currently facing multiple challenges regarding consumption flow and wealth accumulation, which significantly impact economic growth and welfare. The aim of this study is to investigate the asymmetric effects of booms and busts on consumption and wealth accumulation in Iran during the years 1971 to 2023. To analyze the asymmetric effects of output, this study employs the nonlinear autoregressive distributed lag (NARDL) method. The results indicate that economic booms lead to an increase in consumption and wealth accumulation, while economic busts lead to a decrease in them. Furthermore, the adverse effects of busts on consumption and wealth accumulation are significantly greater than the positive effects of booms, and these asymmetric effects intensify in the long run. In addition, inflation and unemployment have a negative impact on consumption, while government size has a positive impact. Similarly, inflation and government size directly affect wealth accumulation, while the unemployment rate has an inverse effect.

Keywords

Main Subjects

References

Bakhtiari, S., Ranjbar, H., & Ghorbani, S. (2013). Composite Index of Economic Well Being and its Measurement for Selected Developing Countries. Economic Growth and Development Research, 3(9), 58-41. https://dor.isc.ac/dor/20.1001.1.22285954.1391.3.9.3.7 (In Persian).
Barro, R. J. (1979). On the determination of the public debt. Journal of Political Economy, 87(5, Part 1), 940-971. https://doi.org/10.1080/00343404.2024.2436538.
Berger, D., & Vavra, J. (2015). Consumption dynamics during recessions. Econometrica, 83(1), 101-154. https://doi.org/10.3982/ECTA11254.
Blanchard, O. (2017). Macroeconomics (7th ed.). Pearson.
Broer, T. (2020). Consumption Insurance Over the Business Cycle. CEPR Discussion Paper No. DP14579. Retrieved from https://ssrn.com
Brunner, A. D. (1997). On the Dynamic Properties of Asymmetric Models of Real GNP. The Review of Economics and Statistics, 79(2), 321-326. https://doi.org/10.1162/003465397556674.
Charles, K. K., & Stephens, Jr. M. (2006). The level and composition of consumption over the business cycle: the role of "quasi-fixed" expenditures. National Bureau of Economic Research (NBER) Working Paper Series, No. 12388. Retrieved from https://www.nber.org
De Giorgi, G., & Gambetti, L. (2017). Business cycle fluctuations and the distribution of consumption. Review of Economic Dynamics, 23, 19-41. https://doi.org/10.1016/j.red.2016.07.005.
Easterlin, R. A. (1974). Does Economic Growth Improve the Human Lot? Some Empirical Evidence. Nations and Households in Economic Growth, 89–125. https://doi.org/10.1016/B978-0-12-205050-3.50008-7
Fisher, I. (1930). The Theory of Interest. Macmillan.
Gustman, A. L., Steinmeier, T. L., & Tabatabai, N. (2014). The Great Recession, Decline and Rebound in Household Wealth for the Near Retirement Population. NBER Working Paper Series, No. 20584. Retrieved from https://www.nber.org
Greve, B. (2008). What is Welfare? Central European Journal of Public Policy, 2(1), 50-73. https://doi.org/10.4337/9781800885127.00007.
Hasanpour Varkolaei, M., Abdi Seyyedkolee, M., & Zaroki, S. (2024). Analysis of the Role of Prosperity and Recession on Welfare in Iran: Compared to Oil and Non-Oil Production. The Journal of Economic Policy, 16(32), 173-207. https://doi.org/10.22034/epj.2024.20739.2506      (In Persian).
Horry, H., Jalae, S. A., & Lashkari, M. (2020). Investigation the Effect of Business Cycle on the Index of Economic Well-being in Iran. Iranian Journal of Economic Research, 25(82), 149-172. https://doi.org/10.22054/ijer.2020.11913 (In Persian).
Hayley, S., & Chrystal, A. (2018). Measuring Economic Activity. Oxford University Press. https://doi.org/10.1093/hebz/9780198787051.003.0009
Kaminsky, G. L. (2019). Boom-Bust Capital Flow Cycles. NBER Working Paper Series, No. 25890. Retrieved from https://www.nber.org
Kafaie, S. M. A., & Pourfathy, N. (2020). Investigation of the Effect of Exchange Rate Volatality on Economic Welfare and Determination of Appropriate Monetary Policy. Quarterly Journal of Economic Strategy, 8(31), 5-42. (In Persian)
Moll, B. (2014). Wealth Distribution and the Business Cycle. 2014 Meeting Papers, No. 93, (Society for Economic Dynamics).
Müller-Plantenberg, N. A. (2012). Boom-and-bust cycles marked by capital inflows, current account deterioration and a rise and fall of the real exchange rate. Economic Analysis Working Paper Series, No. 10/2012. Retrieved from https://repositorio.uam.es
Maliar, L., Maliar, S., & Mora, J. (2005). Income and Wealth Distributions Along the Business Cycle: Implications from the Neoclassical Growth Model. Topics in Macroeconomics, 5(1), 1-28. https://doi.org/10.2202/1534-5998.1238.
Osberg, L., & Sharpe, A. (2009). New Estimates of the Index of Economic Well-being for Selected OECD Countries. Centre for the Study of Living Standards. Retrieved from https://www.researchgate.net
Rostamzadeh, P., & Goudarzi Farahani, Y. (2017). Forecasting the Occurrence of Business Cycles Using Band-Pass Filter in Iran’s Economy. The Journal of Economic Policy, 9(18), 41-64. https://doi.org/10.29252/JEP.9.18.4110.29252/J.9.18.41. (In Persian)
Sadeghi, M., Akbari, N., & Amiri, H. (2016). The Impact of Targeted Subsides of Basic Goods on the Household Welfare: A Case Study of the City of Isfahan. The Journal of Economic Policy, 8(16), 41-64. https://dor.isc.ac/dor/20.1001.1.26453967.1395.8.16.3.7 (In Persian).
Sharpe, A. (1999). A Survey of Indicators of Economic and Social Well-being. Centre for the Study of Living Standards. Retrieved from https://www.csls.ca
Schneider, M. T., & Winkler, R. (2021). Growth and Welfare under Endogenous Lifetimes. The Scandinavian Journal of Economics, 123(4), 1339-1384. https://doi.org/10.1111/sjoe.12455.
Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework. Festschrift in Honor of Peter Schmidt: Econometric Methods and Applications, 281-314. Retrieved from https://ssrn.com
Wilkerson, C. R., & Williams, M. D. (2011). Booms and Busts in Household Wealth: Implications for Tenth District States. Economic Review-Federal Reserve Bank of Kansas City, 81-104. Retrieved from https://www.kansascityfed.org
York, R., & Light, R. (2017). Directional Asymmetry in Sociological Analyses. Socius: Sociological Research for a Dynamic World, 3, 1-13. Retrieved from https://journals.sagepub.com
Zaroki, S., & Moghadasi Sedehi, A. (2021). The Role of Boom and Recession in Energy Consumption of Sectors with Emphasis on Electricity and Non-Electricity. Quarterly Journal of Economic Modelling, 15(53), 97-124. (In Persian)
Macroeconomics Research Letter
Volume 20, Issue 48
December 2025
Pages 31-53

Files

History

  • Receive Date: 07 February 2025
  • Revise Date: 20 March 2025
  • Accept Date: 25 April 2025

Share

How to cite

Statistics