Determining the Effect of Productivity Shock and Fluctuation Shock of Foreign Exchange Earning on the Household Asset Basket in the Iranian Economy using Dynamic Stochastic General Equilibrium Approach

Financial markets, especially the capital market, may have strong links with other economic sectors. One of the most important aspects of investment is to determine the “optimal investment portfolio”. To date, some research has been conducted to determine the optimal portfolio with” artificial intelligence” and “Fuzzy Logic”. However, we determine the optimal portfolio based on Dynamic Stochastic General Equilibrium (DSGE) model. This study examines the design and calibration of the new Keynesian dynamic stochastic equilibrium model related to an optimal investment portfolio and the effect of shocks such as productivity shocks and foreign exchange earnings’ fluctuation shocks on macroeconomic variables. To this end, we design a DSGE model with sectors of households and firms, government and the central bank, and calibrate the model’s parameters after logarithm–Linearization using seasonal data of 1996-2016 and results of empirical studies. In the designed model, households maintain a portfolio of stocks, cash, securities, and other assets based on risk and return or an optimal portfolio. In the end, we assess the impulse response function of economic variables to shocks of productivity and foreign exchange earnings. Ultimately, the comparison of the present moments in the current study and moments of real data indicates the relative success of the model with regard to the realities of Iranian economy.