Document Type : ORIGINAL ARTICLE

Author

• Bagher Hesami Azizi

Facaulty member of Payame Noor university.

Abstract

Identifying the regimes governing a macroeconomy is a prerequisite for designing effective economic policies in developing economies. This study aims to identify and analyze Iran’s macroeconomic regimes and to derive corresponding policy implications using a nonlinear Markov–Switching model. The likely outlook of macroeconomic regimes over the 1404–1410 horizon is also examined. The main contribution of this paper lies in redefining the Markov–Switching model from a purely descriptive tool for business cycles into a forward-looking framework for policy design.

Empirical findings indicate that Iran’s economy has fluctuated among three distinct regimes during the sample period: recession, moderate growth, and high growth. The transition matrix results show that low- and moderate-growth regimes exhibit greater persistence than the high-growth regime, reflecting the structural vulnerability of Iran’s economy to macroeconomic shocks and the limited sustainability of high-growth episodes. Forecast results further suggest that over the 1404–1410 horizon, the continuation of a moderate-growth regime accompanied by periodic fluctuations is the most likely macroeconomic scenario for Iran.

From a policy perspective, the results underscore that the effectiveness of economic policies is regime-dependent, and that applying uniform policies across different conditions may exacerbate macroeconomic volatility. Accordingly, the design of countercyclical, stabilization, and precautionary policies tailored to prevailing regimes is essential to enhance macroeconomic resilience and stability. The findings provide an analytical basis for economic policymakers and support the alignment of policy choices with the country’s overarching development objectives.

Keywords

• Macroeconomic Regimes
• Markov Switching Model
• Economic Policy Making
• Economic Growth
• Iranian Economy

Main Subjects

• GDP