Investigating and Comparing the Impact of the Global Financial Crisis on the Economies of Iran and Turkey using (DSGE) Method

Document Type : Research Article

Authors

1 PhD student in Economics, Shahid Chamran University, Ahvaz

2 Professor, Department of Economics, Shahid Chamran University, Ahvaz

3 Associate Professor, Department of Economics, Shahid Chamran University, Ahvaz

Abstract

While most policymakers and economists agree that the global financial crisis will have adverse consequences for the global economy as a whole, relatively little empirical work has been done to examine the effects of the financial crisis on macro variables and the real sector of the Iranian economy. In this paper, we aim to examine the effect of the financial crisis on the economies of Iran (as a relatively closed economy) and Turkey (as a relatively open economy) in the framework of the new Keynesian school, using the two-country Dynamic Stochastic General Equilibrium (DSGE) model. For this purpose, using the parameters estimated by Bayesian method during the period 1998:1 to 2017: 4, the effects of the global financial crisis on the economies of Iran and Turkey have been analyzed separately through the application of five shocks: monetary policy, investment, productivity in tradable and non-tradable goods and risk premium to the world economy. Then, the response of important macroeconomic variables of Iran and Turkey to these shocks such as GDP, consumption, inflation, investment, and net exports and the components of each of these variables are simulated. According to the findings of this study, both the economies of Iran and Turkey are affected by the crisis, but the severity of the impact of the Iranian economy is less than the Turkish economy due to its less economic relationship with the world, but the persistence of the impact of shocks on the Iranian economy is greater than the Turkish economy.

Keywords

References

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Journal of Applied Economics Studies in Iran
Volume 9, Issue 35
October 2020
Pages 177-217

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