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Effect of Sanctions in Iran's 2013-2014 Recession: A Business Cycle Accounting Approach
Karimi Rad, Ali | 2014
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- Type of Document: M.Sc. Thesis
- Language: Farsi
- Document No: 46954 (44)
- University: Sharif University of Technology
- Department: Management and Economics
- Advisor(s): Madanizadeh, Ali
- Abstract:
- We extend the work of Chari et al. (2007) to Iran’s economy institutions and introduce two additional wedges—the trade wedge and the oil wedge. The measured trade wedge value is regressed on nominal exchange rate, and thus we decompose the measured trade wedge into two components. One component represents the effect of nominal exchange rate on trade barriers and the other is representative of the effect of international sanctions in trade barriers. Then we evaluate the contribution of these two components of the trade wedge to the macroeconomic fluctuations in Iran from 2012 to 2014. Our results suggest that the trade wedge is crucial to account for the behavior of imported intermediate goods. Output movements are driven primarily by the efficiency wedge and the international sanctions component of trade wedge. The role of nominal exchange rate component of the trade wedge appears to be minimal. In contrast to the business cycle accounting of developed countries, the role of the labor wedge is trivial in Iran’s economy
- Keywords:
- Sanction ; Business Cycle Accounting ; Trade Wedge ; Recession ; Government Wedge ; Efficiency Wedge ; Labor Wedge
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