The Effect of Economic Shocks on the Consumption Iranian Households

Document Type : Research Paper


1 Assistant professor of Bu-Ali Sina university,Department of Economics

2 Ph.D candidate in Economics, Bu-Ali Sina University, Department of Economics


The purpose of this study is to investigate the the permanent and transitory components of household income, liquidity (money) and government expenditures to identify economic shocks affected the household consumption in Iran. For this target, using the univariate stochastic detrending approach proposed by Beveridge and Nelson (BN), we decompose the time series data of these variables over the period (1974-2014) into permanent and transitory components. Using the technique of ARDL, the effects of the permanent and transitory of the shocks on households' consumption are studied. The paper results show that there is positive and significant relationship between household consumption and temporary and permanent income shocks and permanent liquidity shocks, whereas a significant and negative relationship with permanent government spending shocks in Iran. Thus, the fiscal, monetary and income government policies should be in a way that keep the permanent income of Iranian households from any destructive shock on economy.
JEL Classification: D31, D91, E21


Main Subjects

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Volume 53, Issue 4 - Serial Number 125
December 2018
Pages 941-970
  • Receive Date: 29 August 2017
  • Revise Date: 09 May 2018
  • Accept Date: 08 May 2018
  • First Publish Date: 22 December 2018