Phillips curve and consumer behavior based on Giffen and Veblen goods under monetary floor effect

Document Type : Original Article

Authors

1 Ph.D. Candidate, Department of Economics, Faculty of Economics, Management and Administrative Sciences, Semnan University, Semnan, Iran

2 Professor Emeritus, Department of Economics, Faculty of Economics and Social Sciences, Bu-Ali Sina University, Hamedan, Iran

3 Professor, Department of Economics, Faculty of Economics, Management and Administrative Sciences, Semnan University, Semnan, Iran

10.22034/jepr.2025.142138.1174

Abstract

The aim of this article is to examine consumer behavior regarding Giffen and Veblen goods in response to monetary shocks. Using the Dynamic Stochastic General Equilibrium (DSGE) model, the reactions of Iran's macroeconomic variables were analyzed based on seasonal data from the period 2001-2022. The results of this study showed that following a monetary base shock, inflation and labor demand increased, while the real interest rate decreased. Investment initially exhibited a positive short-term reaction but eventually declined. With the rise in household consumption expenditures, imports of consumer, capital, and intermediate goods also increased. The monetary base shock affected consumption more significantly than production and investment. Therefore, this shock had a positive impact on inflation and consumption, indicating consumer behavior that violates the law of demand but remains rational. As a result, it is recommended that policymakers focus on identifying Giffen and Veblen goods based on household income deciles, increasing production to meet societal needs, implementing stabilization policies particularly for Giffen goods, reducing the impact of the monetary base through oil revenues, and making appropriate investments in research and development.

Keywords

Main Subjects

References

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History

  • Receive Date: 13 September 2024
  • Revise Date: 05 April 2025
  • Accept Date: 06 April 2025
  • Publish Date: 22 June 2025

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