Impacts of economic shocks on livestock in Iran: a DSGE model approach

The objectives of this study is to investigate the responses of livestock economic variables (namely, output, consumption, prices, labor and capital) to changes in agricultural productivity, monetary, oil revenue and government spending (fiscal policy). To do so, a Dynamic Stochastic General Equilibrium (DSGE) model is constructed for Iran economy disaggregating livestock. Accordingly, the empirical results show that a rise in agricultural productivity results in rising livestock output consumption, hours worked and capital and falling price index. In response to positive monetary shock all the variables increase. Livestock consumption and prices rise following by positive oil revenue shock. However, output, employment, capital and real wages initially fall and rise 3-4 quarters after shock occurrence suggesting the symptoms of Dutch Disease in Iran’s agriculture. Government spending shock leads to an increase in the output, consumption, hours and prices and a decrease in capital. To sum up with, the findings reveal agricultural productivity shock has the strongest effects on livestock subsector when compared to those of other shocks. The negative effects of oil revenue shock are more than those of other shocks and we see the weakest responses under monetary and government spending shocks.