Analyzing the Economic Impacts of Shocks within a Long-run Structural Macroeconometric Model for Iran in a Global Context

Sameti, Majid; Teimouri, Bahareh; Shajari, Hoshang; Sameti, Morteza

Analyzing the Economic Impacts of Shocks within a Long-run Structural Macroeconometric Model for Iran in a Global Context

Authors

Majid Sameti

Bahareh Teimouri

Hoshang Shajari

Morteza Sameti

Abstract

This paper estimates a structural cointegrating VARX model with exogenous variables for Iran. The long-run macroeconomic relationships are identified and tested within this framework. We make use of the Generalized Forecast Error Variance Decomposition to analyze the dynamic properties of the model in response to different shocks. We also examine via the persistence profiles, the speed of adjustments to the long-run equilibrium following a system wide shock. The results show that money demand relation and output gap are not rejected within the model. Furthermore, these two long-run relations have well behaved persistence profiles in which the effects of shocks on the long run relations are transitory and die out eventually.
JEL Classification: C10, C22, E20, E3

Keywords

Cointegrated vector autoregressive model (VAREX)

Long run relation

Vector Error Correction Mode