Examination and Comparison of the Economic Effects of International Risk Spillovers on the Iran?s Money Market by Approach the DCGE Model

Pardis Alsadat Seyedmashhadi    
Sayyed Abdolmajid Jalaee    
Mehdi Nejati    
Mohsen Zayandehroodi    


Opening doors of the economy and moving toward the globalization process increase business transactions, capital mobility and at the same time economies of scale and technology transfer. Naturally, risk spillovers are occurred along with business transactions and capital mobility. They can be effective on various sectors of economy that the most important sector is the money market. Thus, the main question in this study is that do risk spillovers of the oil market has effect on Iran's money market? Given the structure of Iran's economy, one of the most important channels of transferring international risk to the country's economy is oil price changes. According to the exploration of economic effects of financial crises on oil price as well as the previous process of its changes, the seven percent decrease of oil price has been explored as the major scenario and it is tried to show its effect on macro-economic variables especially the money market. Considering the effect of international risk spillovers on macro-economic variables via structural equations, dynamic computable general equilibrium models (DCGE) are employed. The results revealed that the international risk index influences macro variables that most of them are inflation, investment, welfare and demand for money. Given that the present study was focused on the effect of international risk index on the money market, outputs of model estimation showed that the international risk spillover of oil has had an increasing effect on demand for money at first but it has gradually been led to a totally quiet stability.

pp. 21 - 36

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