Document Type : Research Paper
Authors
Abstract
The objective of this study is the analysis of long-term consumption behavior which can be used for a better understanding of consumption behavior and for a proper view of the effectiveness of monetary policy in Iran. In this study, consumption has been expressed as a function of earnings and stock prices and, also, asymmetric cointegration method has been used. Cointegration tests have proved the long-term relationship existing between consumption and its determinants. In the short-run, also, the causal effects of the stock price change on the consumption were confirmed and the results showed that the negative shocks are corrected after four periods and the wealth effect is totally lost. In contrast, when the stock price shocks cause consumption shift upward the long-term trend, the effect of wealth on the Iranian people consumption behavior is proved. In other words, consumption attaches upward and the positive shocks due to stock price shocks are not corrected. Therefore, the implementation of the expansionary monetary policy may lead to increased total economic production.
JEL classification:E21, C22
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