Investigating the Impact of National Currency Value Shocks on the Inflation Structure and Unemployment of the New Keynesian Model Using a Dynamically Computable General Equilibrium Approach

Subject Areas : Financial Accounting

Hediyehsadat  Mirsharafodini ¹ (Department of Economics, Kerman Branch, Islamic Azad University, Kerman, Iran)
Abdolmajid  Jalaee ² (Department of Economics, Faculty of Management and Economics, Shahid Bahonar University of Kerman)
Mohsen  Zayandehroodi ³ (Department of Economics, Kerman Branch, Islamic Azad University, Kerman, Iran)

Received: 2022-05-08 Accepted : 2022-06-25 Published : 2023-09-01

Keywords: Dynamically Computable General Equilibrium, National Money Shocks, Inflation and Unemployment Structure, Keynesian Model,

Abstract :

The direct effect of shocks is to create uncertainty in economic variables. These unpredictable fluctuations influence all economic decisions of the government and the private sector. Also, the formation of people's expectations causes these shocks to have dynamic effects on all economic variables. Inflation is a general, disproportionate, and self-inflicted rise in prices that is often irreversible. The purpose of this study is to investigate the structure of inflation and unemployment of the new Keynesian model with a dynamic general equilibrium approach. Also in this study, dynamic CGE models of long-term relationships related to the decisions of economic institutions such as households and investors were used. Data were analyzed using the proposed practical models. According to the results, inflation in the whole country increases with currency shock. The stronger the currency shock, the stronger the consequent increase in inflation. But unemployment is temporarily reduced by a currency shock.

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