The Effect of Productivity, Fiscal and Monetary Policies on Social Welfare in Terms of Commitment: Based on Ramsey Problem

Document Type : Original Article

Authors

1 Assistant Professor of Economics, Islamic Azad University, Shahinshar Branch, Shahinshar, Iran

2 Professor of Economics, Faculty of Administrative Sciences and Economics, University of Isfahan, Isfahan, Iran

3 Associate Professor of Economics, Department of Economics, Islamic Azad University, Isfahan Branch (Khorasgan), Isfahan, Iran

Abstract

Economic policy making refers to the set of government actions and interventions in the economy to achieve economic and social goals, using the tools under its control within the frame of facilities and constraints. The main purpose of government policy is moving from existing condition and reaching to the optimal condition. The main purpose of this paper is to measure the effect of fiscal and monetary policies and changes in productivity on the level on social welfare in terms of commitment Based on Ramsey problem. Therefore, using the Ramsey problem, the variables of private sector consumption and leisure are extracted, calibrated, and is simulated in the form of three scenarios for commitment and non-commitment conditions for the period of 1971-2016. The results show that; The highest growth in consumption and welfare is due to the growth of productivity and changes in fiscal and monetary policy have a reducing effect on consumption and welfare. As a result, despite the commitment conditions in the Iranian economy and the acute unemployment problem, the government should pay special attention to the employment of low-income groups in determining fiscal and monetary policy, with a view to increase social welfare in the country's economic programs.

Keywords

References

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Journal of Economics and Modelling
Volume 11, Issue 2 - Serial Number 42
September 2020
Pages 97-124

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