Abstract:
Understanding the dynamics of productivity shocks is instrumental if we are to identify
the sources of economic growth. This paper, investigates dynamic effects of positives
productivity shocks to agricultural subsectors during the period from 1991-2015, by
disaggregating agricultural sector in Iran into four key subsectors (crops, livestock,
fishing and forestry) through an estimated DSGE model. Our Bayesian estimation results
suggest that positive productivity shocks lead to an increase in output, consumption,
capital, employment and real wages and a fall in marginal costs and price indexes in all
four subsectors. Comparing the results across the subsectors shows that following the
shocks, generally, crops and livestock have the strongest reactions and forestry has the
weakest ones. Additionally, among the variables, output indicates the highest responses
to the shocks. Variance decomposition analysis reveals that agricultural fluctuations are
mainly explained by productivity, monetary, preference and government spending
shocks.
Machine summary:
Evidence from a Bayesian DSGE Model in Iran {مراجعه شود به فایل جدول الحاقی} Understanding the dynamics of productivity shocks is instrumental if we are to identify the sources of economic growth.
This paper, investigates dynamic effects of positives productivity shocks to agricultural subsectors during the period from 1991-2015, by disaggregating agricultural sector in Iran into four key subsectors (crops, livestock, fishing and forestry) through an estimated DSGE model.
Our Bayesian estimation results suggest that positive productivity shocks lead to an increase in output, consumption, capital, employment and real wages and a fall in marginal costs and price indexes in all four subsectors.
The baseline model, in this study, is a small-open economy DSGE model, with price rigidities, capital accumulation, investment adjustment cost, and habit formation, emphasizing on agricultural subsectors.
e. , consumption, output, employment, real wages, capital, price indexes and marginal costs) to a rise in the productivity of same subsector.
In theory, positive productivity shocks in real business cycle models with real rigidities (Francis and Ramey (2005)) or in sticky price models (Gali (1999)) can generate negative effects on employment.
To do so, a DSGE model for Iran economy, emphasizing on agricultural subsectors, including price rigidities, capital accumulation, investment adjustment costs, and habit formation, is constructed.
Our Bayesian estimation results suggest that positive productivity shocks lead to an increase in output, consumption, employment, capital and real wages and a fall in marginal costs and price indexes in all four Iran's agricultural subsectors.