The Effect of News Shock on Consumption in the Iranian Economy: A Dynamic Stochastic General Equilibrium Approach

Subject Areas : Agricultural Economics Research

Foad Eshghi ¹ , Seyed- Mojtaba Mojaverian ² , Amir Mansour Tehranchian ³ , eyed Ali Hosseini Yekani ⁴

1 - Assistant Professor of Agricultural Economics, Sari Agricultural Sciences and Natural Resources University, Sari, Iran.
2 - Associate Professor, Agricultural Economics, Sari Agricultural Sciences and Natural Resources University, Sari, Iran.
3 - Professor, University of Mazandaran, Babolsar, Iran.
4 - Associate Professor, Agricultural Economics, Sari Agricultural Sciences and Natural Resources University, Sari, Iran.

Received: 2020-01-19 Accepted : 2021-10-11 Published : 2022-01-21

Keywords: Consumption, Technology shocks, News shocks, DSGE, Small open economies,

Abstract :

Introduction: The gap between the price received by the producer and the price paid by the consumer is referred to as the marketing margin. How decision-makers, consumers and supply chain brokers make decisions is affected by various shocks.
Materials and Methods: In this study, a stochastic dynamic general equilibrium model and impact-response functions were used to investigate shocks during the period 1974-2014.
Findings: The results showed that the shock of good news and technology leads to a positive deviation in production and a negative deviation in the marketing margin of the agricultural sector. Also, price fluctuations due to news and technology shocks in the Iranian economy move in line with the cycle of recession and prosperity. Thus, news and technology shocks play an important role in the fluctuations of important economic variables. Also, the impact of the media on the marketing margin of the agricultural sector, the importance of news and transparency in the economic environment should be considered by policy makers.
Conclusion: news shock in general leads to a negative deviation in the marketing margin and the marketing margin of the agricultural sector in particular. Also, price fluctuations due to technological shocks in the Iranian economy move in line with the cycle of recession and news boom, because the emergence of technological shocks leads to a positive deviation of production.

References:

1. 1. Hosseini S, Peykani Gh, Shahbazi, H, Hosseini A. Investigating the marketing margin of red meat and the factors affecting it in Iran. Journal of Agricultural Economics. 2007; 2(2):5-9.

https://www.sid.ir/fa/journal/ViewPaper.aspx?id=828351

2. 2. Mehdi Pour E, Sadrolashrafi M, Karbasi A. A Survey of Potato Product Marketing in Iran. Journal of Agricultural Research. 2005;11(3): 122-126. https://www.sid.ir/fa/Journal/ViewPaper.aspx?id=54684


3. 3. Lucas J. R. Econometric policy evaluation: a critique. in K. Brunner and A The Phillips curve and labor markets. North Holland. 1976.

https://web.sgh.waw.pl/~atoroj/makroekonomia_zaawansowana/lucas76.pdf

4. 4. Sharifi N, Daei N, Karimzadeh, S, Amrolahi Pourshirazi F. Investigating the effects of monetary policy on GDP through the banking system lending channel in Iran. Quarterly Journal of Economic Modeling. 2009; 3(4): 10-48.

https://www.sid.ir/fa/Journal/ViewPaper.aspx?ID=137075

5. 5. Shahmoradi A, Ebrahimi E. Assessing the Effects of Monetary Policy on the Iranian Economy in the Form of a Random Dynamic Neo-Keynesian Model. 20^th Annual Conference on Monetary and Currency Policies. Monetary and Banking Research Institute of the Central Bank of the Islamic Republic of Iran. 2010.

http://jmbr.mbri.ac.ir/browse.php?a_id=129&sid=1&slc_lang=fa

6. 6. Rajaei Y, Nasiri P. Investigating apple marketing in Urmia city using Mark Up model. Journal of Management Studies. 2011; 21-34.

https://www.sid.ir/fa/journal/ViewPaper.aspx?id=130637

7. 7. Hosseini S, Nikokar A, Door Andish A. Analysis of market structure and the effect of price transfer on marketing margins in the beef industry. Iranian Journal of Agricultural Research and Development. 2010; 41(2): 147-157.

https://ijaedr.ut.ac.ir/article_22287.html?lang=fa

8. 8. Kydland F, Prescot Time to Build and Aggregate Fluctuations. Econometrica.1982; 20(2): 1350-1356.

https://www.jstor.org/stable/1913386?seq=1

9. 9. Malkhozov A, Andrea T. News Shocks and Asset Prices. Review of Economic Dynamics. 2013;15(2): 188-206.

http://eprints.lse.ac.uk/id/eprint/62004

10. 10. Arezki R, Ramey V, Sheng L. News Shocks in Open Economies: Evidence from Giant Oil Discoveries. Article IV Consultation.2015; 32(1): 15-19.3386/w20857


11. 11. Dissanayake R. Government spending shocks and asset prices. In 29th Australasian Finance and Banking Conference.2016.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2799778

12. 12. Matsumoto A, Cova P, Pisani M. New Shocks and Asset Price Volatility in General Equilibrium. IMF Working Paper. 2011; 11-20.

https://doi.org/10.1016/j.jedc.2011.08.004

13. 13. Miyamoto W, Lan Nguyen T. News Shocks and Business Cycles: Evidence from Forecast Data. Columbia University. JOB MARKET PAPER.2014.

https://economicdynamics.org/meetpapers/2014/paper_259.pdf

14. 14. Jinnai R. News Shocks, Price Levels, and Monetary Policy. Hi-Stat Discussion Paper. Institute of Economic Research Hitotsubashi University. 2011;(186):157-173.http://hermes-ir.lib.hit u.ac.jp/hermes/ir/re/18969/gd10-173.pdf


15. 15. Gali J, Monacelli T. Monetary Policy and Exchange Rate Volatility in a Small Open Economy. Review of Economic Studie. 2005; 72 (4): 718-734.

https://doi.org/10.1111/j.1467-937X.2005.00349.x

16. 16. Tahmasbi A, Moghadasi R. Factors affecting the marketing margin of Iranian chicken meat. Journal of Agricultural Economics and Development. 2018; 18(71):21-40.

https://iranjournals.nlai.ir/handle/123456789/427953

17. 17. Dixit A. K, Stiglitz J. E. Monopolistic competition and optimum product diversity. The American economic review. 1977; 67(3): 297-308.

https://www.jstor.org/stable/1831401?seq=1

18. 18. Calvo Staggered Price Setting in a Utility-Maximizing Framework. Journal of Monetary Economics. 1983; 12 (2): 386-394.

https://doi.org/10.1016/0304-3932(83)90060-0

19. 19. Mehrara M, Haeri M. Comparative study of economic fluctuations in oil-exporting countries. Journal of Energy Economics Studies. 2008; 5(1): 1-29. https://www.sid.ir/fa/Journal/ViewPaper.aspx?id=100302


20. 20. Khan H, Tsoukalas The Quantitative Importance of News Shocks in Estimated DSGE Models. Review of Economic Dynamics. 2012; 14(1):101–121.

 https://doi.org/10.1111/j.1538-4616.2012.00543.x

21. 21. Lim G, Li S, Bao B. An Estimated Small DSGE Model for Australia: Insights from Alternative Monetary Policy Rules. Department of Economics, the University of Melbourne Working Paper.

https://www.researchgate.net/profile/Guay-Lim/publication/228753875_An_Estimated_Small_DSGE_Model_for_Australia_Insights_from_Alternative_Monetary_Policy_Rules/links/5416bdbe0cf2788c4b35e365/An-Estimated-Small-DSGE-Model-for-Australia-Insights-from-Alternative-Monetary-Policy-Rules.pdf

22. 22. Tomek G.W, Robinson K.L. Agriculture Product price. Cornell University Press. Fourth Edition. 2003.

https://d1wqtxts1xzle7.cloudfront.net/55868053/5BookReviews_25_3.pdf?1519273403=&response-content-disposition=inline%3B+filename%3D3_0_0_K_REVIEWS_Agricultural_Product_Pri.pdf&Expires=1621942322&Signature=arCaVmPM52IT7DCz~YhRTfU6h3ztIDuJT5aS7lm1vVV-FvkLqknDQcDtcLBdDy9578-iT4MXzdeQsHm89pH7hgK6j6ylln75yfmnYWtBRV9xyk7PWRUd4MknTzGJiccQj-jiXGY-b6DWQLLSWpfunUw1A-bLw7usAEtTgOtW6Ki8LOgngeK9mEKt35~UuR~VYAIhD2C0512hBP~WjnpN1kdJGN0SSCBF-jukW6ASbvw3wwNKHpeRtD9faR3vtzOzeV3LO9A3iVjkY8Z365LsDqONipNG3Gakx8VpBEEpR4K6~YTZOvjqwBddlkPfNOkQLs81tK03Hl9KrOsY1-yQjg__&Key-Pair-Id=APKAJLOHF5GGSLRBV4ZA

23. 23. Barsky R, Sims A. News Shocks and Business Cycles. Unpublished manuscript. University of Virginia. 2011.

https://doi.org/10.1016/j.jmoneco.2011.03.001

24. 24. Tovar F. Camilo DSGE models and central banks. Monetary and Economic Department. 2009; 258-291.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1726846