Iranian Journal of Trade Studies

Iranian Journal of Trade Studies

The impact of monetary and fiscal policies on business cycles in Iran: a fuzzy approach

Document Type : Research Paper

Authors
1 Assistant Professor, Department of Economics, Faculty of Management and Economics, Lorestan University, Khorramabad, Iran
2 PhD in Economics, Razi University, Kermanshah, Iran
3 PhD student in Economics; Faculty of Economics and Accounting; Razi University of Kermanshah, Kermanshah; Iran
Abstract
Uncertainty of exchange rate is one of the factors that has faced Iran's economy with many challenges and has caused instability in macroeconomic variables. In the meantime, the variable of indirect taxes can be affected by the uncertainty of the exchange rate due to the two important sub-sectors of import tax and transaction tax. Because the expected fluctuations in the exchange rate can change the amount of imports or the volume of transactions. On the other hand, the change in indirect taxes, in turn, will affect the government budget and the consequences of the budget deficit will cause problems for the entire economy. Therefore, in this research, the effect of exchange rate uncertainty on indirect taxes has been investigated. For this purpose, the fuzzy regression method has been used for the time period of 1991-2021. The results showed that the uncertainty of the exchange rate has a significant negative effect on the absorption of indirect taxes in Iran's economy. The average value of the impact factor is -0.0431, which is between the upper and lower limits of -0.0338 and -0.0524. Also, the results show that the inflation rate has the most negative effect and oil revenues have the most positive effect on the absorption of indirect taxes in Iran's economy.
 
Keywords

Subjects


 
Afonso, A., Alves, J., & Balhote, R. (2019). Interactions between monetary and fiscal policies. Journal of applied Economics, 22(1), 132-151. https://doi.org/10.1080/15140326.2019.1583309
Alpanda, S., Granziera, E., & Zubairy, S. (2021). State dependence of monetary policy across business, credit and interest rate cycles. European Economic Review, 140, 103936. https://doi.org/10.1016/j.euroecorev.2021.103936
Alavi Bajgani, S. A. R. , Peykarjo, K. , Hojaber Kiani, K. and Torabi, T. (2020). A study of the nonlinear effects of fiscal policies on economic activities during business cycles through the Smooth Transition Auto Regressive (ESTAR) approach. The Journal of Economic Policy12(23), 345-374. doi: 10.22034/epj.2020.12690.2021. doi:10.22034/EPJ.2020.12690.2021 .[in Persian]
Angeletos, G. M., Collard, F., & Dellas, H. (2020). Business-cycle anatomy. American Economic Review, 110(10), 3030-3070. https://assets.aeaweb.org/asset-server/files/12408.pdf
Auclert, A., Rognlie, M., & Straub, L. (2020). Micro jumps, macro humps: Monetary policy and business cycles in an estimated HANK model (No. w26647). National Bureau of Economic Research. Doi: 10.3386/w26647.
Azimi hosseini, A. , Akbari Moghaddam, B. and Asadi, M. (2021). The Effect of Economic Fluctuations and Monetary and Fiscal Policies on Business Cycles (The Case of Oil Economies and BVAR Approach). Economic Growth and Development Research, 11(43), 64-51. doi: 10.30473/egdr.2020.49957.5569.[in Persian]
Barghi-Asgoui, M. M., Motefaker Azad, M. A., Salmani Bishak, M. R., & Shokri, M. (2020). Investigating the Cross-Effect of Corporate Profit Tax and Exchange Rate Uncertainty on FDI Attraction in Iran: A Fuzzy Approach. Fiscal and Economic Policies, 8(31), 43-75. https://journals.iau.ir/article_694723.html.[in Persian]
Bagheri, S,. F,. Nazarian, R,.  Hadinejad, M,.  and Damankashi, Marjan (2021). The impact of macro-banking, financial and economic indicators on the business cycles of Iran and selected Islamic developing countries and sustainable development, Financial Economics, 16(2), 303-323. https://journals.iau.ir/article_694723.html .[in Persian]
Bayer, C., Born, B., & Luetticke, R. (2024). Shocks, frictions, and inequality in US business cycles. American Economic Review, 114(5), 1211-1247.
Beraja, M., Hurst, E., & Ospina, J. (2019). The aggregate implications of regional business cycles. Econometrica, 87(6), 1789-1833. https://doi.org/10.3982/ECTA14243Digital Object Identifier .
Blom, E., Cadena, B. C., & Keys, B. J. (2021). Investment over the business cycle: Insights from college major choice. Journal of Labor Economics, 39(4), 1043-1082. https://hdl.handle.net/10419/11403
Bianchi, F., Ilut, C., & Saijo, H. (2024). Diagnostic business cycles. Review of Economic Studies, 91(1), 129-162. http://www.nber.org/papers/w28604
Broad berry, S., Chadha, J. S., Lennard, J., & Thomas, R. (2023). Dating business cycles in the United Kingdom, 1700–2010. The Economic History Review, 76(4), 1141-1162. DOI: 10.1111/ehr.13238
Blom, E., Cadena, B. C., & Keys, B. J. (2021). Investment over the business cycle: Insights from college major choice. Journal of Labor Economics, 39(4), 1043-1082. https://hdl.handle.net/10419/114034
Calderon, C., Duncan, R., & Schmidt-Hebbel, K. (2016). Do good institutions promote counter-cyclical macroeconomic policies. Oxford Bulletin of Economics and Statistics, 4(6), 49-90. https://doi.org/10.1111/obes.12132
Cerra, V., Fatás, A., & Saxena, S. C. (2023). Hysteresis and business cycles. Journal of Economic Literature, 61(1), 181-225.  DOI: 10.1257/jel.20211584
Christiano, L. J., Trabandt, M., & Walentin, K. (2021). Involuntary unemployment and the business cycle. Review of Economic Dynamics, 39, 26-54. https://doi.org/10.1016/j.red.2020.05.003
Coulibaly, B. (2012). Monetary policy in emerging market economies: What lessons from the global financial crisis. International Finance Discussion. 1042. http://www.dallasfed.org/assets/documents/institute/wpapers/2012/0118
Dery, C., & Serletis, A. (2024). Business cycles in the USA: the role of monetary policy and oil shocks. Empirical Economics, 67(1), 1-30. https://doi.org/10.1007/s00181-024-02556-5
Dolado, J. J., Motyovszki, G., & Pappa, E. (2021). Monetary policy and inequality under labor market frictions and capital-skill complementarity. American economic journal: macroeconomics, 13(2), 292-332.  DOI: 10.1257/mac.20180242
Dupraz, S., Nakamura, E., & Steinsson, J. (2025). A plucking model of business cycles. Journal of Monetary Economics, 103766. https://doi.org/10.1016/j.jmoneco.2025.103766
Eghbali, A. , Ghobeyshavi, A. and Abdollahi, F. (2020). The Impact of Fiscal Policy on Business Cycles in Iran. The Journal of Economic Studies and Policies7(2), 107-132. doi: 10.22096/esp.2020.43404. .[in Persian] . https://journals.mofidu.ac.ir/article_43404.html
Elmi-Moghadam, M., Shokri, M., Abolhasani Hastiani, A., Amini Milani, M., & Mansouri, N. (2023). Analyzing How Iran's Economic Growth Rate is Affected by Economic Sanctions (Fuzzy Approach). Research in Planning and Development, 15, 79-118..[in Persian]. Doi:10.22034/pbr.2023.189414
Erfani, A. and Kasaipour, N. (2019). The Behavior of Monetary Policy during the Business Cycle in the Iran Using DSGE Model. Quarterly Journal of Applied Theories of Economics5(4), 53-80. https://ecoj.tabrizu.ac.ir/article_8401.html . [in Persion]
Emami Langroodi, F. (2021). Schumpeter’s Theory of Economic Development: a study of the creative destruction and entrepreneurship effects on the economic growth. Journal of Insurance and Financial Management, 4(3). Research11(43), 64-51. doi: 10.30473/egdr.2020.49957.5569.[in Persian].
Fairlie, R. W., & Fossen, F. M. (2020). Defining opportunity versus necessity entrepreneurship: Two components of business creation. In Change at home, in the labor market, and on the job (pp. 253-289). Emerald Publishing Limited. https://doi.org/10.1016/j.jmoneco.2025.103766
Falahati, A, Ahmadi, M, Rezaei, A and Narimani, A (2016), Estimating potential output and output gap for Iran and examining the policy to achieve continuous economic growth (data filtering approach), Quarterly Journal of Strategic and Macroeconomic Policies, 4(13): 113-97.[in Persian]. https://www.jmsp.ir/article15475 html
Gross, T., Notowidigdo, M. J., & Wang, J. (2020). The marginal propensity to consume over the business cycle. American Economic Journal: Macroeconomics, 12(2), 351-384. DOI: 10.1257/mac.20160287
Gudarzi farahani, Y. , Morsali Arzanagh, Z. , Mehrara, M. and Abbasi, E. (2025). Measuring the effect of uncertainty of economic policies in business cycles on macroeconomic variables with DSGE model approach. Economic Growth and Development Research15(58), -. doi: 10.30473/egdr.2024.71351.6852.[in Persian] doi:10.30473/egdr.2024.71351.6852
Haberler, G. (2024). Money and the business cycle. In Business Cycle Theory, Part I Volume 3 (pp. 257-290). Routledge. Htpss:// www. taylorfrancis.com
Jalalpoor, A. , Abtahi, S. Y. , Totonchi, J. and Dehghan Tafti, M. A. (2020). Nonlinear Correlation between Business Cycles and Monetary Policy in Iranian Economy. The Journal of Economic Studies and Policies7(2), 81-106. doi: 10.22096/esp.2020.43400. .[in Persian]. https://economic.mofidu.ac.ir/article_43400.html
Khochiani, R. and Nademi, Y. (2018). Revisiting the Relationship between Inflation    and Output Gap in Iranian Economy Using Wavelet Transform Approach. Economics Research18(69), 307-334.[in persian].  https://doi.org/10.22054/joer.2018.8871
Khodaei, E. (2009). Fuzzy Linear Regression and Its Applications in Social Science Research. Iranian Journal of Social Studies, 3(4), 82-99. .[in Persian]. https://www.sid.ir/journal 
Khosravi, F. , Eskandari Sabzi, S. , Hagh khah, D. , Gharehdaghi, R. and Salmanpour, A. (2022). Investigating the Effect of Bank Facilities on Business Cycle in Services and Housing Sectors in Iran's Economy. Journal of Economics and Modelling13(2), 37-63. doi: 10.29252/jem.2022.227883.1770.[in Persian] .
 DOI: 10.48308/jem.2022.227883.1770
  Kourehpazan Dezfuli, A. (2005). Principles of Fuzzy Set Theory and Its Applications in Modeling Water Engineering Problems. Tehran, Jihad Daneshgahi Publications, 2nd Edition. .[in Persian]. https://www isba.ir
Jones, C. (2023). Aging, secular stagnation, and the business cycle. Review of Economics and Statistics, 105(6), 1580-1595.  https://sites.google.com/site/jonescallum
Liu, W., & Liu, Y. (2022). The impact of incentives on job performance, business cycle, and population health in emerging economies. Frontiers in public health, 9, 778101. https://doi.org/10.3389/fpubh.2021.778101
Löwe, A. (2024). On the Influence of Monetary Factors on the Business Cycle 1. In Business Cycle Theory, Part I Volume 3 (pp. 199-212). Routledge. https://www.taylorfrancis.com
Loungani, P., Swagel, P (2001), Sources of Inflation in Developing Countries, IMF. https://www.imf.org
Ludvigson, S. C., Ma, S., & Ng, S. (2021). Uncertainty and business cycles: exogenous impulse or endogenous response?. American Economic Journal: Macroeconomics, 13(4), 369-410. DOI: 10.1257/mac.20190171
Mamipour, S. , Jafari, S. and Sasanian Asl, Z. (2018). The Effects of Fiscal and Monetary Policies on Iranian Business Cycle Dynamics with Time Varying Markov Switching Models. Iranian Journal of Economic Research23(75), 167-203. doi: 10.22054/ijer.2018.9125.[in Persian]. https://doi.org/10.22054/ijer.2018.9125
Martínez-Rodriguez, I., Callejas-Albiñana, F. E., & Callejas-Albiñana, A. I. (2020). Economic and socio-cultural drivers of necessity and opportunity entrepreneurship depending on the business cycle phase. Journal of Business Economics and Management, 21(2), 373-394. https://hdl.handle.net/10419/317393 
Michaillat, P., & Saez, E. (2022). An economical business-cycle model. Oxford Economic Papers, 74(2), 382-411.  http://www.nber.org/papers/w19777
Mitchell, W. C. (2024). Business cycles. In Business Cycle Theory, Part II , 8, 225-241, Routledge. http://www.nber.org/books/comm23-1
Michaillat, P., & Saez, E. (2022). An economical business-cycle model. Oxford Economic Papers, 74(2), 382-411.  www.nber.org/papers/w19777
Mohanetfar, Y,. and Mikaeili, S, (2013). Evaluating the relationship between inflation rate and output gap in Iran, Fiscal and Economic Policies, (3)1, 116-97.[in Persian]. http://qjfep.ir/article-159-fa.html
Nasr-Esfahani, R, Akbari, N and Bidaram, R (2005), Calculating the quarterly GDP gap and the impact of nominal factors on it in Iran, Quarterly Journal of Iranian Economic Research, 7(22): 68-43.[in Persian] https://ijer.atu.ac.ir/article_3775.htm
Parihar, M., Ajayan, A., Bhatia, A., Bhedasgaonkar, A., Lalwani, H., Morde, C., & Patel, S. (2025). Empirical Analysis of Impact of Monetary Policy on Business Cycle. In The Paradigm Shift from a Linear Economy to a Smart Circular Economy: The Role of Artificial Intelligence-Enabled Systems, Solutions and Legislations , 291-308. https://doi.org/10.1007 /978-3-031-87550-2_2
Pflueger, C., & Rinaldi, G. (2022). Why does the Fed move markets so much? A model of monetary policy and time-varying risk aversion. Journal of Financial Economics, 146(1), 71-89. https://doi.org/10.1016/j.jfineco.2022.06.001
Pugsley, B. W., & Șahin, A. (2019). Grown-up business cycles. The Review of Financial Studies, 32(3), 1102-1147. https://doi.org/10.1093/rfs/hhy063
Saadat, R. , Abounori, E. and Reiskarami, F. (2023). Shocks in Iran's Business Cycle: Dynamic Stochastic General Equilibrium Models Approach. Economic Policies and Research2(2), 139-174. doi: 10.22034/jepr.2024.140259.1065. [in persion]
Salmani, B., Zolghadr, H., & Shokri, M. (2016). Investigating Economic Factors Affecting Internet Penetration in Iran Using Fuzzy Regression. Journal of Applied Economic Theories, 4(3), 91-166.[in Persian] doi:10.22034/JEPR.2024.140259.1065
Shaygani, B. , Eghbali, A. and Zarrini, E. (2023). Identifying factors affecting business cycles in Iran's economy: quantile regression approach. Stable Economy Journal4(2), 112-145. doi: 10.22111/sedj.2023.45866.1355. .[in Persian]. Doi:10.22111/SEDJ.2023.45866.1355
Shokri, M., Saadatmehr, M., & Zolghadr, H. (2025). Analyzing Economic Factors Affecting Inflation Rate in Lorestan Province: A Fuzzy Approach. Biannual Journal of Economic Policy, 17(33), 85-120.[in Persian].  Doi:10.22034/epj.2024.21062.2550
Shokri, M., Barghi, M. M., Motafaker Azad, M. A., Salmani Bishak, M. R. (2020). Investigating the Impact of Economic Sanctions and Exchange Rate Uncertainty on FDI in Iran: A Fuzzy Approach. Journal of Economics and Modelling, 11(3): 33-59.[in Persian]. https://ecoj.sbu.ac.ir/article_100970.html
Taheri, M., & Mashinchi, M. (2008). An Introduction to Fuzzy Probability and Statistics. Shahid Bahonar University of Kerman Press, 1st Edition.[in Persian]
Taheri Bazkhaneh S, Ehsani M A, GILAK Hakim Abadi M, FarzinVash A. Financial Cycles and Monetary Policy in Iran's Economy. qjerp 2020; 28 (95) :307-341. [in Persian]. https://qjerp.ir/article-1-2430-fa.html
Tanaka, H. & Ishibuchi, H. (1992). Possibility regression analysis based on linear programming. Jurnal of Eropan research. 2 (3): 44-60.  https://cir.nii.ac.jp/crid
Tanaka, H. (1987). Fuzzy data analysis by possibility linear models Fuzzy Sets and Systems , 24(3): 363- 375. https://cir.nii.ac.jp
Tinbergen, J. (2024). Annual survey: Suggestions on quantitative business cycle theory. In Business Cycle Theory, Part II Volume 8 ,263-332 . https://www.taylorfrancis.com
Yakhin, Y. (2008). Financial integration and cyclicality of monetary policy in Small open economies. Rice University.  Htpss://www.policyarchive.org
Zadeh, L. A. (1965). Fuzzy sets. Information and Control, 8­(3), 338-353.  https://doi.org/10.1016/S0019-9958(65)90241-X

  • Receive Date 23 September 2025
  • Revise Date 18 November 2025
  • Accept Date 31 January 2026