Presentation of a Mathematical Model for Optimal Portfolio in the Form of a Dynamic Stochastic General Equilibrium Model for Economy of Iran

Document Type : Research Paper


1 Department of Economic Mofied university ,Qom, Iran

2 Department of Economic Boali sina university, Iran



One of the most important aspects of investment is determining the “optimal investment portfolio”. To date, scientific 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. On the other hand, several factors affect returns, which is one of the most important issues in investment decision-makings, and various models have been developed to analyze the return of “capital” and “other assets”. In this regard, some of the most important models include linear and non-linear models, artificial neural network models, Fama–French model, Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) model, and optimal stable model. All of these models are indicative of the use of quantitative methods and models in the investment industry. One of the causes of using these models is developing the financial economy. In fact, the development of financial economy has more increased with the concept of “portfolio optimization”. In fact, the portfolio optimization and diversification concept is the basis of developing and expanding classical finance and financial decision-making. Financial markets, especially the capital market, can have a great deal of relevance to other sectors of the economy. In the present study, we design and calibrate a new Keynesian DSGE model in relation to the optimal investment portfolio and effectiveness of shocks (e.g., productivity and foreign exchange earnings fluctuation) on macroeconomics variables.


[1] Bernanke. B., Gertler. M., Gilchrist, S., The Financial accelerator In a Quantitative business cycle framework, Taylor,J.B,wood ford .M. (Eds.)Istedition  Handbook of  Macroeconomics, 1999,  1(B), P.20.
[2] Birjandi, N., Elahi, N., Rezai, M., Bakhshi Zadeh, M., The effect of Credit Shock on Collateralized Unemployment on Islamic Contracts and Financial Instruments, Daynamic Stochastic General Equilibrium, DSGE Approach: for PhD Thesis, 2019, Mofid University. (in Persian).
[3] Daliri, H., Mehregan, N., The effects of removing grammatical interest rate on the effect of monetary policy based on DSGE model, Mgazin Research Economic, 2014, 3, P.523-553.
[4] Eslami B., Bigdeloo, M., Comparison of Returns and Risks of Alternative Investment Opportunities in Iran ,resach Aconting , 2006, 13(44), P.149-175 (in Persian).
[5] Fallahi, S., The Role of the Banking Sector and The Interest Rate Determination Policy in the Intraction between the Credit and Business Cycles in a Daynamic Stochastic General Equilibrium Model: DSGE, Student Saman Fallahi, Supervisor Dr.Timur Rahmani,Advisory Board of Dr.Ali Souri,Dr.Seyed Ali Madnizadeh, 2019 , Tehran University (in Persian).
[6] Green wood, J., Hercowitz, Z., krusell, Long –run implications of investment specipic techno logical change, AM, Eoon, 1997, Rev, 87, P.342-3620. Doi:10.2139/ssrn.1921612 .
[7] Kaviani, M., Saeedi, P., Didehkhani, H., Fakhr Hosseini, S. F., The Effect Shocks Base Monetary on stock Price Returns of Stock Active Companies, DSGE Approach, Financial Research Quarterly, Twelfth Year, 2019, 42, P.121-148.
[8] Kim, S.T., and  Rescigno.L., Monetary policy shock and distreesed firms, stock returns , Evidense from the publicly traded us fiams Economics Letters , 2017 , 160, P.91-94 .Doi: 10.1016/j.econlet.2017.09.009
[9] Kydland, F.E., Prescott, E,C., Time to Build and Aggregate pluctuatians, Econometrica , Journal.of the Econometric society, 1982, P.1445. Doi: 10.2307/1913386
[10] Mishkin, F., Monetary Policy strategy:lessons  from  the crisis  NBER  working  Paper  Series, 2018, 16755.
[11] Zamanian, M., Sadeh, E., Amini Sabegh, Z., Ehtesham Rasi, R., A Fuzzy Goal-Programming Model for Optimization of Sustainable Supply Chain by Focusing on the Environmental and Economic Costs and Revenue, A Case Study. Advances in Mathematical Finance and Applications, 2019, 4(1), P.103-123.
 Doi: 10.22034/amfa.2019.578990.1134
[12] Pourjavan, A., Selah Manesh, A., Anwar, A., Arman, S, A., Playning and calibration of a new Keynesian DSGE model with stock market dynamic in Iranian economy, Financial knowledge of Securities Analysis, SUMMER 2018 , 11(38), P.57-75, (in Persian).
[13] Prabheesh, K,P., Vidya , C.T., DO  business cycles investment – specific technology shocks matter for stock re turns,  Economic Modelling, 2017. Doi:10.1016/j.econmod.2017.09.014
[14] Khoshroo, A., Izadikhah, M., Improving efficiency of farming products through benchmarking and data envelopment analysis, International Journal of Management and Decision Making, 2019 18(1), P. 15-30.
[15] Fallahi, S., The Role of the Banking Sector and The Interest Rate Determination Policy in the Intraction between the Credit and Business Cycles in a Daynamic Stochastic General Equilibrium Model: DSGE, Student Saman Fallahi, Supervisor Dr.Timur Rahmani,Advisory Board of Dr.Ali Souri,Dr.Seyed Ali Madnizadeh,  Tehran University, 2019. (in Persian).
[16] Salahmanesh, A., Armen, S, A., Anvarey, A., Pour Javan, A., Design and Calibration of a New Keynesian Model (DSGE) with Stock Market Dynamics in the Iranian Economy, Magazin Finance Knolage, 2018, 38, P.57-75.
[17] Smets, F, Wouters, R., Shocks and frictions in US business cycles: a Bayesian approach, Am. Econ, 2017, 97(3), P.586-606. Doi: 10.1257/aer.97.3.586. Doi: 10.1257/aer.97.3.586
[18] Tavakolian, H., Komijani., Monetary policy dominated by financial and inflation targeting implicit in a DSGE model, Magazen Economics Modeling, 2012, 8, P.86-118.Dor: 20.1001.1.22286454.1391.
[19] Taylor, J, B., Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis, Hoover Institution press, 2009, ISBN0-8179-1971-2.
 [20] Gholizadeh, A, A., Norvarzi Negad, M., Housing price dynamics and economic fluctuations in Iran with a random dynamic general equilibrium approach Economic Modeling Research Quarterly,Summer, 2019, 26.
 [21] Kiani, A., Islamluian, K., Shahnazi, R., Rostamzadeh, P., The effect of the origin of oil price shocks on macroeconomic dynamics in a major oil exporting country, an open random dynamic general equilibrium model, Economic Modeling Research Quarterly, 2019, 28 (in Persian).
[22] Jalali Naeini, S, A, R., Toklian, H., Zamanzadeh, H., Davoodi, P., In terms of firm entry and exit in a stochastic dynamic general equilibrium model for the Iranian economy, Applied Economic Studies of Iran, Spring 2019, 29, P.1-39(in Persian). Doi: 10.22084/AES.2018.16877.2687
[23] Towar, C., Dsge Models and Gentral Bank, Economics, 2009, 3(16), 10. Doi:10-5018/economics-eJournal.ja-2009-16.
[24] Chung, K.H., Chaw Gnganant, C., Market Volatility and Stock returns: The role of Liquidity Providers, Journal of Financial Markets., 2017, Doi: 10.1016/j.finmar.2017.07.002
[25] Chung, T.F., Ariff, M., Atest of The Linkage a Mongomong Money Supply, Liquility and share Prices in Aaia, Japon and the world Economy, 2016, 39, P.48-61.
[26] Cupta. R., Modise, M.P., Macroeconomic Variables and South African Stock Return Predictability, Economic Modelling, 2013, 30, P.612-622. Doi: 10.1016/j.econmod.2012.10.015
[27] Nistico, S., Monetary Policy and Stock-Price dynomics ina DSGE Framework, Journal of Macro Economics 2012, 34, P.126-146.
[28] Irelad, P., Moneys Role in the Monetary business cycle, 2004, Journal of Money credit and banking, 36(6), P.969-983. Doi: 10.3386/w8115
[29] Calvo, G.A., Staggered prices in a utility-maximizing framework, Journal of Monetary Economics, 1983, 12 (3), P. 383-398, Doi:10.1016/0304-3932(83)90060-0.
[30] Shahmoradi, A., Ebrahimi, I., Assessing the effects of monetary policy on the Iranian economy in the form of a stochastic New Keynesian dynamic model, Proceedings of the 20th Annual Conference on Monetary and Foreign Exchange Policy, Monetary and Banking Research Institute, 2010, Central Bank. Iran. (in Persian).
[31] Taei, H., Labor Supply Function: A Micro-Based Analysis, Iranian Economic Research Quarterly, 2006, 29, P. 93-112. (in Persian).
[32] Kavand, H., Explaining the effects of oil revenues and monetary policy in the form of a model of real business cycles for the Iranian economy, 2009, PhD thesis, Faculty of Economics, University of Tehran. (in Persian).
[33] Zanganeh, M., Business Cycles in the Form of a General Equilibrium Pattern of New Keynesian DSGE Stochastic Dynamics Despite Deficits in Financial Markets, 2009, PhD Thesis, University of Tehran, Faculty of Economics. (in Persian).
[34] Rahbar, F., Salimi, E., The Role of Government and National Development Fund Financial Discipline in Reducing the Dutch Disease in the Iranian Economy, Iranian Journal of Applied Economics, 2015, 4(4), P. 219-243
[35] Fakhr Hosseini, S. F., The model of real business cycles with the formation of the habit of a solution for exchange of shares, Quarterly Journal of Economic Modeling 2016, 10(3), P.141-169.
[36] Manzoor D, Taghipour A., A dynamic stochastic general equilibrium model for an oil exporting and small open economy: the case of Iran. Quarterly Journal of Economic Research and Policies, 2016, 23 (75), P. 7-44
 [37] Bayat, M., Reaction of pricing statistics thresholds to inflation rate changes, Monetary and Banking1990, Research Institute of the Central Bank of the Islamic Republic of Iran.
 [38] Shah Hosseini, S., Bahrami, J., Designing a New Keynesian Stochastic Dynamics General Equilibrium Model for the Iranian Economy Considering the Banking Sector, Iranian Economic Research Quarterly, 2012, 17(53), P.55-83
 [39] Amin, A., Haji, M., Estimating the time series of capital stock in the Iranian economy during the period 1338-1381, Journal of Planning and Budget, 2005, 90, P.53-86. (in Persian)
[40] Dargahi, M., Evaluation of monetary and financial shocks with emphasis on the interaction of bank balance sheets and the real sector of the Iranian economy, DSGE approach, Quarterly Journal of Applied Economic Theories, 2016, 3 (1), P.1-28.
[41] Ahmadian, A., Amiri, H., Study of the effect of financial repression on inflation in the Iranian economy, Financial Knowledge and Securities Analysis, Financial Studies, 2012, 13(5), P.111-122.
Volume 7, Issue 1
January 2022
Pages 81-96
  • Receive Date: 08 December 2019
  • Revise Date: 26 August 2020
  • Accept Date: 23 October 2020
  • First Publish Date: 05 January 2021