Volume 9, Issue 34 (12-2018)
jemr 2018, 9(34): 31-70 |
Back to browse issues page
Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
Mamipour S, Abdi H. The Effects of Oil Price Shocks on Transitional Dynamics of Business Cycles in Iran: Markov Switching Model with Time Varying Transition Probabilities (MS-TVTP). jemr 2018; 9 (34) :31-70
URL: http://jemr.khu.ac.ir/article-1-1670-en.html
URL: http://jemr.khu.ac.ir/article-1-1670-en.html
1- Kharazmi University , mamipours@gmail.com
2- Kharazmi University
2- Kharazmi University
Abstract: (6000 Views)
The business cycles are one of the most important economic indicators that they show the changes in economic activities during time. The study of business cycles is important because the understanding fluctuations in GDP and effective factors on these fluctuations help policy makers to plan better and more efficient. The main purpose of this paper is to investigate the effects of oil price shocks on business cycles dynamics in Iranian economy during period of 2005 to 2017 by using non-linear Markov switching model with the time varying transitional probabilities (MS-TVTP). So, first, the oil price shocks were extracted in four different modes, and then the effect of them on recession and boom regimes are investigated. The results of MS-TVTP model show that business cycles are affected by oil price fluctuations and shocks in Iran’s economy. The results indicate that, in all four modes which oil price shocks were calculated, the positive shocks in oil price increase the probability of staying in boom regime. Also positive oil price shocks increase the probability of transition from the recession regime in Iran’s economy. Also, with relative comparison of the coefficients of oil price shocks in the probability of staying in boom regime and transition from recession to boom regime, it can be argued that positive oil price shocks in recession period increases the probability of transition from recession more than the boom regime. In other words, oil price shocks in recession periods have a greater effect on rotation of economic situation and increase the probability of transition from recession regime, but in the boom regime, the positive oil price shock lead to increases the probability of staying in boom regime a little.
Keywords: Business Cycles, Oil Price Shocks, Markov Switching Model, Time Varying Transition Probabilities, Iran.
Type of Study: Applicable |
Subject:
انرژی، منابع و محیط زیست
Received: 2018/03/2 | Accepted: 2018/11/27 | Published: 2019/02/25
Received: 2018/03/2 | Accepted: 2018/11/27 | Published: 2019/02/25
References
1. Abiyev, V., Ceylan, R., & Özgür, M. I. (2015). The Effects of Oil Price Shocks on Transitional Dynamics of Turkish Business Cycle. Sosyoekonomi, 23(25). [DOI:10.17233/se.99563]
2. Arman, S,. Peyro, F. (2013). Asymmetric Effects of Oil Shocks on Business Cycles in Iran's Economy. Quarterly Journal of Quantitative Economics, 10(4), 113-146. (In Persian)
3. Burns, A. F., & Mitchell, W. C. (1946). Measuring Business Cycles National Bureau of Economic Research. New York.
4. Cavallo, A., & Ribba, A. (2018). Measuring the effects of oil price and Euro-area shocks on CEECs business cycles. Journal of Policy Modeling, 40(1), 74-96. [DOI:10.1016/j.jpolmod.2017.09.006]
5. Chauvet, M., (2011), Real Time Analysis of the U.S Business Cycle, Mimeo, Federl Reserve Bank of Atlanta.
6. Cologni, A., & Manera, M. (2009). The asymmetric effects of oil shocks on output growth: A Markov-Switching analysis for the G-7 countries. Economic Modelling, 26(1), 1-29. [DOI:10.1016/j.econmod.2008.05.006]
7. Damiri, F,. Eslamlueian, K, Hadian, E,. Akbarian, R. (2017). The Effect of Endogenous Reaction of Monetary Authorities to an Oil Shock on Internal and External Sectors in an Oil Exporting Country: The Case of Iran. Quarterly Journal of Quantitative Economics, 14(3), 187-213. (In Persian)
8. Das, D., Bhatia, V., Pillai, J., & Tiwari, A. K. (2018). The relationship between oil prices and US economy revisited. Energy Sources, Part B: Economics, Planning, and Policy, 13(1), 37-45. [DOI:10.1080/15567249.2017.1403497]
9. Dornbusch, R., & Fischer, S. dan R. Startz. (2004). Macroeconomics. 9th Edition, McGraw Hill.
10. Engemann, K. M., Kliesen, K. L., & Owyang, M. T. (2011). Do oil shocks drive business cycles? Some US and international evidence. Macroeconomic Dynamics, 15(S3), 498-517. [DOI:10.1017/S1365100511000216]
11. Faaljoo, H., Seyed Ahmadi, S. (2015). Investigating the Impact of the Global Financial Crisis on the Times of the Depression in Iran (Periodic Approach). Quarterly Journal of Trend, 22(72), 83-104. (In Persian)
12. Fallahi, M., Peyghambari, S. (2007). Interaction between OPEC Oil Basket Growth Rate and Economic Growth of Major OECD Countries. Journal of Humanities and Social Sciences, 7(24), 97-126. (In Persian)
13. Farzanegan, M. R., & Markwardt, G. (2009). The effects of oil price shocks on the Iranian economy. Energy Economics, 31(1), 134-151. [DOI:10.1016/j.eneco.2008.09.003]
14. Fattahi S., Sohaili K., Abdolmaleki H. (2014). Oil Price Uncertainty and Economic Growth in Iran: Evidence from Asymmetric VARMA, MVGARCH-M. Journal of Economic Modeling Research, 5 (17), 57-85. (In Persian)
15. Filardo, A. J. (1994). Business-cycle phases and their transitional dynamics. Journal of Business & Economic Statistics, 12(3), 299-308. [DOI:10.1080/07350015.1994.10524545]
16. Filis, G., Degiannakis, S., & Floros, C. (2011). Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries. International Review of Financial Analysis, 20(3), 152-164. [DOI:10.1016/j.irfa.2011.02.014]
17. Gelb, A. H. (1988). Oil windfalls: Blessing or curse?. Oxford university press.
18. Gholami, Z,.Farzinvash, A,.Ehsani, M. (2014). Business Cycles and Monetary Policy: A Further Investigation Using MRSTAR Models. Quarterly Journal of Economic Research and Policies, 21(68), 5-28. (In Persian)
19. Gronwald, M., Mayr, J., & Orazbayev, S. (2009). Estimating the effects of oil price shockson the Kazakh economy (No. 81). Ifo Working Paper.
20. Hadian, E., Hashempoor, M. (2003). Identifying Business Cycles in Iranian Economy. Iranian Economic Research, 5(15), 93-120. (In Persian)
21. Hadian, E., Parsa, H. (2006). Investigating the Effect of Oil Price Fluctuations on Macroeconomic Performance in Iran. Journal of Humanities and Social Sciences Research, 6(22), 111-132. (In Persian)
22. Hamilton, J. D. (1983). Oil and the macroeconomy since World War II. Journal of political economy, 91(2), 228-248. [DOI:10.1086/261140]
23. Hamilton, J. D. (1996). This is what happened to the oil price-macroeconomy relationship. Journal of Monetary Economics, 38(2), 215-220. [DOI:10.1016/S0304-3932(96)01282-2]
24. Hamilton, J. D. (1989). A new approach to the economic analysis of nonstationary time series and the business cycle. Econometrica: Journal of the Econometric Society, 357-384. [DOI:10.2307/1912559]
25. Khemiri, R., & Ali, M. S. B. (2012). Exchange rate pass-through and inflation dynamics in Tunisia: A Markov-Switching approach (No. 2012-39). Economics Discussion Papers.
26. Krolzig, H. M. (2013). Markov-switching vector autoregressions: Modelling, statistical inference, and application to business cycle analysis (Vol. 454). Springer Science & Business Media.
27. Lee, K., Ni, S., & Ratti, R. A. (1995). Oil shocks and the macroeconomy: the role of price variability. The Energy Journal, 39-56. [DOI:10.5547/ISSN0195-6574-EJ-Vol16-No4-2]
28. Lucas, R. E. (1995). Understanding business cycles. In Essential readings in economics (pp. 306-327). Palgrave, London. [DOI:10.1007/978-1-349-24002-9_17]
29. Mahdavi Adeli, M., Ghezelbash, A., Daneshnia, M. (2012). The Effect of Oil Price Changes on Major Macroeconomic Variables in Iranian economy. Quarterly Journal of Environmental and Energy Economics, 1(3), 131-170. (In Persian)
30. Mamipour, S., Jafari, S. (2017). Affecting Factors on Exchange Market Pressure in Iran by the Markov Switching Model with Time Varying Transition Probability. Journal of Economic Research, 52(2), 163-193. (In Persian)
31. Medeiros de, O., & Sobral, Y. (2014). A Markov Switching Regime Model of the Brazilian Business Cycle. Available at SSRN:https://ssrn.com/abstract=969503
32. Mehregan N., Mohammadzadeh, P., Haghani, M., Salmani, Y. (2013). Investigating the Economic Growth Multi Behavior Patterns in Response to Crude Oil Price Volatility: an Application of GARCH Models and Markov Switching Regression Model. Journal of Economic Modeling Research, 3(12),73-101. (In Persian)
33. Mohaddes, K., & Pesaran, M. H. (2017). Oil prices and the global economy: Is it different this time around?. Energy Economics, 65, 315-325. [DOI:10.1016/j.eneco.2017.05.011]
34. Mork, K. A. (1989). Oil and the macroeconomy when prices go up and down: an extension of Hamilton's results. Journal of political Economy, 97(3), 740-744. [DOI:10.1086/261625]
35. Peersman, G., & Van Robays, I. (2012). Cross-country differences in the effects of oil shocks. Energy Economics, 34(5), 1532-1547. [DOI:10.1016/j.eneco.2011.11.010]
36. Pooriaee, A. (2011). Trade Links and Oil Price Effects on Iran's Economic Growth and Major Trading Partners (1988-2007). Faculty of Economics and Administrative Sciences, University of Isfahan, Iran. (In Persian)
37. Raguindin, C. E., & Reyes, R. G. (2005). The effects of oil price shocks on the Philippine economy: a VAR approach. University of the Philippines School of Economics.
38. Rostamzadeh, P. Goudarzi, F. Y. (2017). Forecasting the Occurrence of Business Cycles Using Band-Pass Filter in Iran's Economy. The Journal of Economic Policy, 9(18), 41-62. (In Persian) [DOI:10.29252/jep.9.18.41]
39. Samadi, S,. Yahyaabadi, A,. Moalemi, N. (2009). Analysis of the Effect of Oil Price Shocks on Macroeconomic Variables in Iran. Quarterly Journal of Economic Research and Policies, 17(52), 5-26. (In Persian)
40. Samadi, S., Sarkhoshsara, A., Amini, D. O. (2017). Asymmetric Effects of Oil Price Shocks on Interest Rates and Economic Growth in Iran: Nonlinear VAR Model. Journal of Economic Modeling, 12(1), 27-52. (In Persian)
41. Samadi, S,.Jalaei, S. (2004). Analysis of business cycle in Iranian economy. Journal of Economic Research, 39(3), 139-153. (In Persian)
42. Salehi Sarbijan, M,. Raeesi Ardali, G. (2011). The Impact of Oil Price Volatility on Iran's Business Cycles: Markov Switching Model. Faculty of Economics and Administrative Sciences, University of Isfahan, Iran. (In Persian)
43. Salehi Sarbijan, M,. Raeesi Ardali, G,. Shetab, B. N. (2013). Stagnation and Prosperity of Iranian Economy Using Markov Switching Model. Journal of Economic Modeling, 7(3), 67-83. (In Persian)
44. Sharestani, H,. Arbabi, F. (2009). Dynamic General Equilibrium Model for Business Cycles in Iran. Economic Research, 9(1), 43-66. (In Persian)
45. Tayebnaya, A., Ghasemi, F. (2010). Measuring Business Cycles in Iran. Journal of Economic Research, 45(92), 183-206. (In Persian)
46. Tayebnaya, A., Ghasemi, F. (2006). The Role of Oil Shocks in the Business Cycles of Iranian Economy. Journal of Economic Research, 6(4), 49-80. (In Persian)
47. Tayebi, S., Dashtban, M., Jabari, A. (2011). Determinants of Business Cycles in Iranian Economy (1970-2008). Economic Studies and Policies, 7(17), 17-36. (In Persian)
Send email to the article author
| Rights and permissions | |
 | This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. |
