Public Sector Accounting and Budgeting

Public Sector Accounting and Budgeting

The role of real purchase option in reducing financial shocks in macroeconomic fluctuations

Document Type : Original Article

Authors
Faezeh Yousefi 1
Mahboobeh Karbalae Khani 2
1 M.A. in Governmental Management (Finance), Islamic Azad University, Central Tehran Branch, Tehran, Iran
2 Ph.D. Student in Economics, Islamic Azad University, South Tehran Branch, Tehran, Iran
10.22034/psab.2023.192683
Abstract
 Usually, asset prices react sensitively to economic news. Experience has shown that the price of capital assets is affected by a wide range of unforeseen events and the effect of some of these events is greater than other events. Identifying the role of different financial shocks in terms of real purchasing power in the occurrence of business cycles is one of the attractive fields of experimental works in the field of macroeconomics. After the recent financial crisis (2007-2008), attention has been paid to the financial sector in explaining macroeconomic fluctuations. In this research, we seek to identify the role of financial sector shocks (credit supply shocks, housing price shocks and stock market shocks) along with real and monetary sector shocks (aggregate supply shocks, aggregate demand shocks, monetary and capital policy shocks). investment with regard to the real purchase option in reducing financial shocks in macroeconomic fluctuations. In order to identify the structure of different shocks, the vector autoregression model with sign restriction has been used. Two main models have been estimated using Bayesian method and seasonal data for the period of 1991:1-2023:4. The findings of this study indicate that financial shocks, especially credit supply shocks, have considerable importance in reducing financial shocks in macroeconomic fluctuations. Also, the evidence indicates that financial shocks have played a stronger role in explaining the recent recession in Iran's financial markets. 
Keywords
Vector autoregression
Bayesian model
Financial shocks
Real purchase option

Subjects

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  • Receive Date 03 June 2023
  • Revise Date 22 July 2023
  • Accept Date 19 August 2023