Considering the importance of implementing monetary policy in any economy, its impact on the main economic variables, including production, is very crucial. This paper examines and analyzes the effects of positive and negative monetary shocks on production in Iran using the MS-DSGE model during the period of 1979-2004. The results of this study indicate that positive and negative monetary policies in the recession periods, as well as boom periods, have asymmetric effects on the growth of domestic production. The effect of positive and negative monetary shocks on production is higher during the recession than during the boom. Generally, the monetary shocks are more effective during the boom than the recession. Accordingly, it is suggested that to achieve the economic goals policymakers should implement their policies during the economic recessions.

This paper introduces MARKOV-SWITCHING (MS) GARCH processes for capturing the skewness in the distribution of financial time series. The model class is motivated by the fact that empirical return distributions characterized by significant asymmetries, but the generic assumption of return distributions is Normal. The out of sample performance of symmetric and asymmetric MS GARCH models is compared in an application to Tehran exchange price index (Tepix). Finally, to put the Regime-SWITCHING models into perspective, we add to the list of competitors a popular model which may serve as a benchmark, i.e., the single–regime GARCH (1, 1). It turns out that asymmetric MS GARCH processes perform best overall.

Price volatility and volatility regime SWITCHING of Iranian important livestock markets are modeled using hay, sheep, calf, mutton, and beef monthly return series over the period of April 1992 to March 2014, using MARKOV-SWITCHING generalized autoregressive conditional hetroscedastisity models. The results suggest the existence of two volatility regimes in all studied markets and frequently SWITCHING from one regime to another all except for hay. Hay market is the most homogeneous market in terms of volatility regime SWITCHING while mutton market is the most variable one. According to results, although the high volatility regime lasts less than low volatility regime, persictency of high volatility regime (at least 5 month) in producer and retailer meat markets and frequently SWITCHING from one regime to another lead to uncertainty of investing in meat production. It also leads to unpredictability of market condition and variability of consumer’s welfare.

This paper attempts to compare a MARKOV-SWITCHING Dynamic Stochastic General Equilibrium (MS-DSGE) model by including deep habits consumption to a MS-DSGE model without deep habits. It is concluded that the deep habit adjusted model with regime SWITCHING is able to fit the Iranian data better. The results of estimating parameters indicate that deep habit formation, together with the persistence of habit stock, are significant parameters. The results also confirm that current and future consumption demand, expected marginal cost and stock of habits are effective driving forces in extracted New Keynesian Philips Curve considering deep habits. However, in contrast with Ravn et al (2006, 2010) findings, it is shown that presence of deep habit consumption in the model for Iranian economy, cannot lead to reduce inflation in response to monetary shock while the amount of increase in inflation in response to monetary shock in the model with deep habit is less than inflation increase in model without deep habits. Furthermore, in response to fiscal shock in the model considering deep habits, the negative effect of wealth could not be compensated in Iranian economy. Therefore, consumption begins to decrease in response to fiscal shock, although these reduction in the model without deep habits takes more longer than in the model with deep habits.