Predicting the Impact of monetary and fiscal policies on the unemployment rate in the Iranian Economy

Document Type : Research Paper


1 PHD Student Faculty of Economics, University of Tehranm

2 Professor, Faculty of Economics, University of Tehran

3 Professor, Faculty of Economics, University of Tehran, Iran

4 Assistant Professor Faculty of Economics, University of Tehran, Iran


The literature has addressed the interaction and dual behaviors of fiscal and monetary policy on the labor market. Generally, if these policies are implemented in the labor market, it is not possible to have a specific outcome.  In this study using the dynamic Bayesian models (TVP-FAVAR, TVP-DMA) we try to determine how these policies affect unemployment rate for The quarterly data during the period 1991Q1 - 2018Q4. According to TVP-DMA results,  the growth rate of government construction expenditures has been one of the most important  factor that affect  unemployment rate changes significantly during 92 periods(out of  112 periods). Based on results of TVP-DMA model, fiscal policy such as Current and construction government expenditures and total tax revenues have had a greater impact on the unemployment rate than monetary policies; changes in the monetary base and the amount of liquidity and exchange rates. The result, based on TVP-FAVAR model, reflect that all variables affecting unemployment have positive effect on this variable in the long run. In other words, executive policies have not been able to reduce unemployment. The time inconsistencies in the implementation of policies and lack of development in labor market infrastructure can be considered as reasons for the ineffectiveness of these variables. Clearly, the positive relationship between unemployment rate and economic growth shows phenomenon of stagflation in the country.
JEL Classification: A**، B**، C**


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