Abstract:
This paper tests the importance of real shocks as sources offluctuations in Iran's economy. For this purpose, based on the work of Boschen and Mills,. a set of non-monetary variables which can affect economic growth have been selected and by using an illustrative business cycle model in which the production depends on the past and current value of real shocks, the influence of these variables have been studied. Based on the obtained results. the selected non-monetary variables have had a significant effect on the business cycles in Iran at the time period of 1959-1999, and introducing the monetary variables into a model with the presence of real variables have not increased the explanatory power of the model considerably
Machine summary:
The main advantage of using a parametric approach over the non-parametric approach of Divisia index is that by allowing for variable returns to scale one can decompose TFP growth into technical change, scale components (and in certain cases assuming flexible functional forms input and scale biases compon !1ts) as: TF P = TC + (RTS - I) , B.
The stochastic production frontier model introduced by Aignar, Lovell and Schmidt ( 1977) is defined as: In Y, ""' o + I:J ) In xj, + E, ' E, V,-U; (11) wherein y, is logarithm of output of firm i, Xi is a vector of logarithm of J inputs, and is vector of unknown parameters to be estimated.
a set of non-monetary variables which can affect economic growth have been selected and by using an illustrative business cycle model in which the production depends on the past and current value of real shocks, the influence of these variables have been studied.
The above studies along with supply shocks associated with the two oil price increases of the 1970s and failure of the demand oriented Keynesian models to account adequately for rising unemployment accompanied by accelerating inflation stimulated the transition from monetary to real theories of business cycles.
The fluctuation in output and employment are due to changes in the technology of production, and the monetary policy leaves no influence on the real variables.
By using an illustrative business cycles model in which the production depends on past and current quantities of the real shocks, the influence of these variables has been studied.