A new Keynesian Dynamic Stochastic General Equilibrium Model for the Iranian Economy with an Emphasis on Banking Sector

  • Hamid Taghizadeh, Hossein Sharifi Renani , Sara Ghobadi


The aim of this paper is to design A new Keynesian dynamic stochastic general equilibrium model for the Iranian economy with an emphasis on the banking sector and the role of monetary policy during 1986-2017. The results of solving the model indicated the relative success of the model in simulating macroeconomics in Iran. In this study, the role of monetary policy on macroeconomic variables using bank balance sheets was evaluated. Based on the results, monetary policy shock had a positive effect on macroeconomic variables such as production, consumption, investment and inflation. The monetary policy shock has led to fluctuations in production and consumption, and the effect of this shock was moderated and eliminated in the long term. In the monetary policy shock, it was observed that the bank's balance sheet in the debt and asset sector had fluctuated based on bank deposits and facilities. Based on the monetary shocks investigated, the monetary policy rule has been considered based on the growth of the money volume. The results indicate that a banking system in the dynamic stochastic general equilibrium model can reduce the negative effect of monetary and credit shocks on brokers' behavior.