Nonlinear Modeling of Unemployment in the Iranian Economy
Keywords:
unemployment, financial structure , monetary policy, financial developmentAbstract
This study aims to model the nonlinear dynamics of unemployment in the Iranian economy and identify the most robust determinants using Bayesian, dynamic, and selective model averaging approaches. The research is applied in nature, covering the period 1992–2021. Fifty potential determinants of unemployment were identified across ten social, economic, political, and financial domains. Bayesian Model Averaging (BMA), Dynamic Model Averaging (DMA), and Weighted Least Squares (WALS) techniques were employed to estimate the models. Based on predictive accuracy and error measures, the Bayesian model exhibited superior performance. Posterior probabilities and coefficients were calculated to determine non-fragile variables influencing unemployment. The analysis revealed 24 key variables significantly affecting unemployment, grouped into ten categories: social indicators (urbanization, poverty, human capital); real economic factors (service value-added, business environment index, Gini coefficient, capital formation, economic growth); nominal economic indicators (consumer inflation, oil revenues); openness indicators (KOF globalization index); labor market features (labor productivity, real wages, structural change index); fiscal policy (total taxes, public development expenditures); monetary policy (exchange rate, interest rate, liquidity); political factors (sanctions, privatization); financial development indicators (private sector credit share); and capital structure indices (banking sector and capital market development). Unemployment in Iran is driven by a complex interaction of structural, financial, monetary, and institutional variables. Policy interventions focused on strengthening financial systems, enhancing human capital, and improving institutional efficiency can effectively reduce unemployment and foster sustainable economic stability.
Downloads
References
Abdi Seyyed Kalaei, M., Mo'tameni, M., & Mosleh, H. (2025). The effect of exchange rate fluctuations on unemployment in MENA countries. Biannual Scientific Journal of Economic Studies and Policies.
Alemu, F. M. (2025). An Empirical Analysis of the Nexus between Inflation, Exchange Rate, Unemployment and Economic Growth in Ethiopia: A Granger Casualty Approach. https://doi.org/10.1177/09750878241234254
Chen, T. C., Kim, D. H., & Lin, S. C. (2021). Nonlinearity in the efects of fnancial development and fnancial structure on unemployment. Economic Systems, 45(1), 100766. https://doi.org/10.1016/j.ecosys.2020.100766
Esaku, S., & Mugoda, S. (2025). Unemployment and the informal economy in Uganda: An empirical investigation. Forum for Economic and Financial Studies, 3(1), 2218-2218. https://doi.org/10.59400/fefs2218
Ibrahiem, D. M., & Sameh, R. (2020). How do clean energy sources and fnancial development afect unemployment? Empirical evidence from Egypt. Environmental Science and Pollution Research, 27(18), 22770-22779. https://doi.org/10.1007/s11356-020-08696-2
Jenkins, R. (2025). Dimensions of Adulthood in Britain: Long-Term Unemployment and Mental Handicap. 131-146. https://doi.org/10.4324/9781003637752-9
Koop, G., McIntyre, S., Mitchell, J., & Poon, A. (2020). Regional output growth in the United Kingdom: More timely and higher frequency estimates from 1970. Journal of Applied Econometrics, 35(2), 176-197. https://doi.org/10.1002/jae.2748
Li, J. H., & Jiang, Y. Y. (2022). Recent Advances of Dynamic Model Averaging Theory and Its Application in Econometrics. Journal of Financial Risk Management, 11, 740-756. https://doi.org/10.4236/jfrm.2022.114036
Mohammadi, P., Askari, F., & Khalili, F. (2022). Factors Affecting the Financial Development Index in Iran. Applied Economics, 12(41), 17-35.
Monfared, S. M., Mohammadi, T., Khezerī, M., & Parīvar, O. (2021). The Role of Financial Development in the Efficiency of Iran's Monetary Policy in Determining Output and Inflation. Scientific Quarterly of Economic Modeling, 15(55), 113-138.
Ngcobo, W. A., Zhou, S., & Pillay, S. S. (2025). The Effect of Financial Market Capitalisation on Economic Growth and Unemployment in South Africa. Economies, 13(3), 57. https://doi.org/10.3390/economies13030057
Nizam, R., Karim, Z., & Rahman, A. (2020). Financial inclusiveness and economic growth: new evidence using a threshold regression analysis. 1465-1484. https://doi.org/10.1080/1331677X.2020.1748508
Pratysto, T. (2025). The Role of Domestic and Foreign Investments in Reducing Unemployment in Asean: A 1999-2023 Panel Ardl Analysis. Jurnal Ekonomi Kreatif dan Manajemen Bisnis Digital, 3(3), 377-386. https://doi.org/10.55047/jekombital.v3i3.914
Raifu, I. A., & Afolabi, J. A. (2022). The Efect of Financial Development on Unemployment in Emerging Market Countries. Global Journal of Emerging Market Economies. https://doi.org/10.1177/09749101221116715
Raifu, I. A., & Folarin, O. (2020). Impact of Financial Development on Merchandise Trade in Nigeria: A Disaggregate Analysis. DBN Journal of Economics and Sustainable Growth, 3(1), 47-80.
Raifu, I. A., Nnadozie, O. O., & Adeniyi, O. A. (2021). Infrastructure-Structural Transformation Nexus in Africa: The Role of Financial Sector Development. Journal of African Development, 22(1), 124-165. https://doi.org/10.5325/jafrideve.22.1.0124
Rasouli, M., Abrīshamī, H., Mehrārā, M., & Esfahāniyān, H. (2020). Forecasting the Impact Mechanism of Monetary and Fiscal Policies on the Unemployment Rate in the Iranian Economy. Journal of Economic Research, 55(2), 321-345.
Reyhāni Mohebbserāj, N., Ahmadi Shādmehrī, M. T., & Fallahi, M. A. (2022). Investigating the Role of Financial Institutions and Markets Development in the Effectiveness of Unemployment-Reducing Monetary Policies. New Economics and Trade, 17(1), 69-106.
Saputra, I. A. G., Subroto, W. T., Sakti, N. C., & Mahendra, A. M. (2024). Decoding Inflation and Unemployment: Exploring the Phillips Curve’s Insights on Short-Term and Long-Term Economic Dynamics. Ijems, 1(4), 228-241. https://doi.org/10.61132/ijems.v1i4.264
Sharifi, B., & Hosseini, M. (2024). The Effects of Economic Uncertainty and Oil Price Volatility on Unemployment in the Iranian Economy: Linear and Nonlinear Models. Quarterly Journal of Iranian Economic Research, 23(2), 211-228.
Sharma, A., & Sachdeva, P. (2023). Macroeconomic impact of the supply shock during COVID-19 pandemic in India. Journal of Economic Studies. https://doi.org/10.1108/JES-09-2022-0474
Shavvalpour Arani, S., Mohseni, R., & Kordtabar Firoozjaei, H. a.-D. (2024). An Asymmetric Analysis of the Impact of Oil Price, Exchange Rate, and Their Uncertainties on Unemployment in Oil-Exporting Countries. Macroeconomic Research Journal, 19(2), 37-70.
Sinyor, M., Silverman, M., Pirkis, J., & Hawton, K. (2024). The effect of economic downturn, financial hardship, unemployment, and relevant government responses on suicide. Lancet Public Health. https://doi.org/10.1016/S2468-2667(24)00152-X
Zamān Zādeh, A., Eḥsānī, M. A., & Ganj'alī, M. (2020). Evaluating the Impact of Fiscal and Monetary Policies on the Length of Unemployment Spells in Industrial Countries. Economics and Modeling, 11(3), 195-225.
Zarīr Negīn Tājī, H. G. Ā., Morādī, Ā., & Alī Ṣādeghīnezhād, M. (2022). Investigating the Relationship Between Economic Growth, Banking Sector Development, and Capital Market in Iran. Financial Economics, 16(60), 195-212.
Downloads
Published
Submitted
Revised
Accepted
Issue
Section
License
Copyright (c) 2025 Nahid Jafari Najafabadi (Author); Fatemeh Zandi (Corresponding author); Bijan Safavi, Mohammad Khezri (Author)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
