Dynamic Labor Market in a Dynamic Stochastic General Equilibrium Model: Case Study of Iranian Economy

The labor market, as one of the four markets, plays an important role in economic growth and development. So review developments in the labor market because of its close relationship with developments in other sectors is of great importance. This study tries to examine the dynamics of the labor market by adjusting for a New Keynesian dynamic stochastic general equilibrium model for the Iranian economy. After the model was solved, the obtained equations were linearized and their parameters were estimated using the economic data of Iran (2005-2017) by the Bayesian method. Comparing the model's moments with the economic momentum indicates the success of the model in real-world simulation (production, consumption, investment, unemployment, and participation rate). Impulse Response Functions Survey shows that participation rates are consistent with cyclic behavior. On the other hand, in response to shocks (monetary, oil revenues, government expenditures, and public sector employment), increased employment, but the unemployment rate has changed slightly due to the change in the participation rate and the change in the size of the active population, which represents the sustainability of the unemployment rate.