The Effect of Public Expenditure Shocks on Macroeconomic Variables in a Real Business Cycle Model. Case Study$#58; Iran

In this research we use a real business cycle model to analyses the impact of stochastic shocks of government spending on macroeconomic variables by application dynamic stochastic general equilibrium. Consumer preferences depend on private and public spending and households are habit forming. Product is transcendental function of government spending. The model estimates by the maximum-Likelilood method using Iran data from 1338 to 1387. Estimation results point out that a negative response of consumption and following a government spending shock. Another macroeconomics like private investment, capital, employment, wages and out-put are cause a positive response to government spending shock.