Investigating the Effects of Banking Resources Shock on Consumption and Investment in IRAN, by DSGE Approach

Lotfalipour, Mohammad Reza; Karimzadeh, Mostafa; Enami, Ali

doi:10.22075/jem.2019.16941.1265

Investigating the Effects of Banking Resources Shock on Consumption and Investment in IRAN, by DSGE Approach

Document Type : Original Article

Authors

¹ Professor in Economics, Department of Economics, Ferdowsi University of Mashhad

² Assistant Professor in Economics, Department of Economics, Ferdowsi University of Mashhad

³ Ph.D. Student in Ferdowsi University of Mashhad

10.22075/jem.2019.16941.1265

Abstract

In the banking system, withdrawal deposit and decrease resources can cause shock in liquidity. On the other side, Bank-centered financial system in IRAN will affect on household consumption decisions and production and investment decisions of manufacturing companies. In this study, in order to survey the effectiveness of resources shock caused by Bank Runs on consumption and investment, New- Keynesian dynamic stochastic general equilibrium (DSGE) model with regard to the banking sector and relevant features is presented. Through this model the response of the variables mentioned against this shock is evaluated. The results of the simulation and estimation models with data that are made stationary in the period 1981 to 2018 with appropriateness of the proposed model for Iran's economy show that the theoretic model is compatible with the economic realities and banking resources shock will leads to consumption increase and investment decrease.

Keywords