Effects of Oil Price Shocks on Agricultural Sector Using Dynamic Stochastic General Equilibrium Model

Authors
Z. Permeh 1
M. Ghorbani 2
H. Tavakolian 3
N. Shahnoshi 2
1 Institute Trade Studies and Research, Ferdowsi University of Mashhad, Mashhad, Islamic Republic of Iran.
2 Department of Agriculture Economics, Faculty of Agriculture, Ferdowsi University of Mashhad, Mashhad, Islamic Republic of Iran.
3 Faculty of Economic, Allameh Tabataba'i University, Tehran, Islamic Republic of Iran.
Abstract
This study aimed to develop a multi-sector Dynamic Stochastic General Equilibrium (Large DSGE) model for Iran’s economy. In this model, economy was divided into three sectors: Agriculture, non-agriculture, and oil. Imports and exports were also included in the model. In order to adapt the model with Iran’s economic conditions, price stickiness in agriculture and non-agriculture were included. Then, the impact of rising oil prices on agricultural sector was examined. To calculate the required coefficients, 1971-2012 data was gathered and Bayesian method was used. The results showed the negative impacts of rising oil prices on agriculture as well as the negative effects of Dutch Disease.

Keywords

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Journal of Agricultural Science and Technology
Volume 19, Issue 6
November and December 2017
Pages 1211-1226