Analyzing the Dimensions and Components of the Effects of Government Military Expenditures on Iran's Business Cycles

Abstract

The current research has investigated the effects of the government's military expenditures on Iran's business cycles within the framework of a DSGE model in the period from 1370 to 1400. The DSGE model has been performed in three scenarios. In the first scenario, there is no differentiation in government expenditures and a standard DSGE model is estimated. In the second scenario, government expenditures are separated into military and civilian expenditures, and in the third scenario, a war shock is included in the model. According to the results of the final logarithm of the Laplace approximation, the second model has a higher explanation for Iran's economy. The results of variance analysis of the model show that the government military expenditure shock is 15.52% of product fluctuations, 12.45% of consumption fluctuations, 11.91% of investment fluctuations, 12.83% of government expenditure fluctuations, 05/05 It explains 11% of employment fluctuations and 6.53% of wage fluctuations. According to the results of instantaneous response functions, a shock to government military expenditures has a negative effect on investment and wages and a positive effect on output, consumption, government expenditures, and employment.