Fiscal Policy of Iran`s Economy in a DSGE Model (Focusing on Non- Ricardian Households)

Document Type : Research Paper


1 Professor of Economics, University of Tabriz

2 Ph.D. student of Economics, University of Tabriz


This paper designs a medium scale dynamic stochastic general equilibrium (DSGE) model for Iran`s economic. According to the model, it is distinguished that taxation rule combination has a significant role in fiscal policy effectiveness. In order to show the combinations, several distortionary taxes are used, which are the rate of labor income taxation, the rate of capital taxation and the rate of consumption taxation. A government expenditure shock affects both Ricardian  and Non- Ricardian consumption. The results of simulation reveal that the shock reduces the consumption of Ricardian households for a short time then, it rises to higher than the stable one. Non- Ricardian households reduce their consumption for several periods and when income increases, they start to increase consumption, too.
JEL Classification: H30, D50, C53, C15


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Volume 52, Issue 3 - Serial Number 120
October 2017
Pages 551-580
  • Receive Date: 17 April 2016
  • Revise Date: 25 January 2017
  • Accept Date: 27 February 2017
  • First Publish Date: 09 October 2017