Dynamic Labor Market in a Dynamic Stochastic General Equilibrium Model: Case Study of Iranian Economy

keshavarz, Hadi

doi:10.29252/jemr.9.35.201

Volume 10, Issue 35 (3-2019) jemr 2019, 10(35): 201-237 | Back to browse issues page

‎ 10.29252/jemr.9.35.201

‎ 20.1001.1.22286454.1398.9.35.4.6

Mendeley

Zotero

RefWorks

keshavarz H. Dynamic Labor Market in a Dynamic Stochastic General Equilibrium Model: Case Study of Iranian Economy. jemr 2019; 10 (35) :201-237
URL: http://jemr.khu.ac.ir/article-1-1745-en.html

Dynamic Labor Market in a Dynamic Stochastic General Equilibrium Model: Case Study of Iranian Economy

Hadi Keshavarz ^*

Persian Gulf University , hd.keshavarz@gmail.com

Abstract: (5370 Views)

The labor market, as one of the four markets, plays an important role in economic growth and development. So review developments in the labor market because of its close relationship with developments in other sectors is of great importance. This study tries to examine the dynamics of the labor market by adjusting for a New Keynesian dynamic stochastic general equilibrium model for the Iranian economy. After the model was solved, the obtained equations were linearized and their parameters were estimated using the economic data of Iran (2005-2017) by the Bayesian method. Comparing the model's moments with the economic momentum indicates the success of the model in real-world simulation (production, consumption, investment, unemployment, and participation rate). Impulse Response Functions Survey shows that participation rates are consistent with cyclic behavior. On the other hand, in response to shocks (monetary, oil revenues, government expenditures, and public sector employment), increased employment, but the unemployment rate has changed slightly due to the change in the participation rate and the change in the size of the active population, which represents the sustainability of the unemployment rate.

Keywords: Labor Market, Dynamic Stochastic General Equilibrium Model, Iranian Economy

Full-Text [PDF 4425 kb] (1460 Downloads)

Type of Study: بنیادی | Subject: سایر
Received: 2018/08/15 | Accepted: 2019/04/27 | Published: 2019/06/10

References

1. Altug, S. and Kabaca, S. (2011). Search frictions, financial frictions and labor market fluctuations in emerging economies. Koç University-TUSIAD Economic Research Forum Working Papers 1136.

2. Bakas, D. and Makhlouf, Y. (2017). Can the insider-outsider theory explain unemployment hysteresis in OCED countries? Nottingham Trent University working paper. 2017/7

3. Bruckner M. and Pappa E. (2012) Fiscal Expansions, Unemployment, and Labor Force Participation: Theory and Evidence. International Economic Review. 53(4) [DOI:10.1111/j.1468-2354.2012.00717.x]

4. Calvo, G. (1983), Staggered Prices in a Utility Maximizing Framework. Journal of Monetary Economics, 12, 383-98. [DOI:10.1016/0304-3932(83)90060-0]

5. Campolmi, Alessia and Gnocchi, Stefano (2016). Labor market participation, unemployment and monetary policy. Journal of Monetary Economics 79, 17-29. [DOI:10.1016/j.jmoneco.2016.03.001]

6. Cavallo M. (2005). Government Consumption Expenditures and the Current Account. Federal Reserve Bank of San Francisco Working Paper 2005-03. [DOI:10.24148/wp2005-03]

7. Dobbie M., (2004). "Hysteresis and Insider-Outside Theory - A Literature Review," Macquarie University Research Papers 0408.

8. Ehsani M. A., Keshavarz h. and Keshavarz M. (2017). The Impact of Monetary and Fiscal Policies on Employment Fluctuations with an Emphasis on Private Sector Employment. Quarterly Journal of Economic Growth and Development Research, 7(26), 124-113(in Persian).

9. Eisazadeh S. and Mehranfar J., ( 2013). Exploring the Impacts of International Immigration on Employment and Wage Rate: Case Study of the Economy of Iran. Journal of Economic Research (Tahghighat-E-Eghtesadi) 48 (2), 111-130. (in Persian)

10. Farzin Vash A., Ehsani M. A. and Keshavarz H. (2014). Financial Shocks and Labour Market Fluctuations with Financial Frictions. Iranian Journal of Economic Research, 19( 59), 1-37. (in Persian)

11. Forni L., Monteforte L. and Sessa L. (2009). The general equilibrium effects of fiscal policy: Estimates for the Euro area. Journal of Public Economics, 93, 559-585. [DOI:10.1016/j.jpubeco.2008.09.010]

12. Galí J., (2016). Insider-outsider labor markets, hysteresis and monetary policy, Universitat Pompeu Fabraو Economics Working Papers 1506.

13. Ghate Ch. and Mazumder D. (2018). Employment Targeting in a Frictional Labor Market. MPRA Paper No. 87065 [DOI:10.1108/IGDR-06-2018-0065]

14. Haefke, C. and Reiter, M.(2011). What Do Participation Fluctuations Tell Us About Labor Supply Elasticities? IZA Discussion Paper No. 6039.

15. Kiguchi T. and Mountford A. (2017). The macroeconomics of immigration. MPRA Paper No. 45517

16. Komijani A. and Tavakolian, H. (2012). Monetary Policy under Fiscal Dominance and Implicit Inflation Target in Iran: A DSGE Approach. Journal of Economic Modeling Research, 2(8), 87-117. (in Persian)

17. Manzoor D. and Bahalou Horeh M. (2016). Analyzing the Impact of Demographic Changes on the Iranian Labor Market: A CGE Analysis. Journal of Economic Modeling Research, 6 (21), 35-65. (in Persian) [DOI:10.18869/acadpub.jemr.6.21.35]

18. Mohamadi T. and Bagheri pormehr Sh (2016). Surveying Degree of Price Rigidity in Iranian Economy (Dynamic Stochastic General Equilibrium Model). Journal of Economic Modeling Research, 6 (22), 33-59. (in Persian) [DOI:10.18869/acadpub.jemr.6.22.33]

19. Moon, Weh-Sol (2011)."Endogenous labor force participation and firing costs. Labour Economics 18, 607-623. [DOI:10.1016/j.labeco.2011.01.004]

20. Motavaseli M., Ebrahimi I., Shahmoradi A. and Komijani A. (2011). A New Keynesian Dynamic Stochastic General Equilibrium (DSGE) Model for an Oil Exporting Country. Journal of Economic Research, 10(4), 87-116. (in Persian)

21. Nuccia F. and Riggi M. (2018). Labor force participation, wage rigidities, and inflation. Journal of macroeconomics, 55, 274-292 [DOI:10.1016/j.jmacro.2017.11.002]

22. Pries, M. and Rogerson, R. (2011). Search frictions and labor market participation. European Economic Review 53, 568-587. [DOI:10.1016/j.euroecorev.2008.10.002]

23. Rhee H. J. and Song J.(2018). Labor market friction, nominal wage rigidities, and monetary policy in a small open economy. International Review of Economics and Finance. Available online 23 March 2018. [DOI:10.1016/j.iref.2018.03.006]

24. Shahmordi A. and Ebrahimi E. (2010).The Impacts of Monetary Policies in Iran: A DSGE Approach. Journal of Monetary & Banking Research, 2 (3), 31-56. (in Persian)

25. Shapiro A. F. (2018). Labor force participation, interest rate shocks, and unemployment dynamics in emerging economies. Journal of Development Economics. 133, 346-374. [DOI:10.1016/j.jdeveco.2018.03.003]

26. Shimer, R. (2005). The Cyclical behaviour of Equilibrium Unemployment, Vacancies, and Wages: Evidence and Theory, American Economic Review, 95(1), 25-49. [DOI:10.1257/0002828053828572]

27. Struck Clemens C. (2018). Labor market frictions, investment and capital flows. Economics Letters 163, 27-31 [DOI:10.1016/j.econlet.2017.11.021]

28. Tripier, F. (2003). "Can the labor market search model explain the fluctuations of allocations of time?" Economic Modelling, 21, 131-146. [DOI:10.1016/S0264-9993(02)00087-1]

29. Tüzemen, D. (2017). Labor market dynamics with endogenous labor force participation and on-the-job search. Journal of Economic Dynamics & Control 75 (2017) 28-51. [DOI:10.1016/j.jedc.2016.11.004]

30. Uhlig H. (2010). Understanding the impact of fiscal policy Some Fiscal Calculus. American Economic Review: Papers & Proceedings 100, 30-34 [DOI:10.1257/aer.100.2.30]

31. Veracierto, M. (2007). On the short-run effects of labor market reforms. Journal of Monetary Economics, 54, 1213-1229. [DOI:10.1016/j.jmoneco.2006.02.007]