Iran's economy has faced a more severe economic sanctions over the past decade. One of the issues that has always been the subject of controversy in the Iranian economy and among economic experts, is what will be the impact of economic sanctions relief - including oil, banking and commercial sanctions - in the country; and especially How much will it be affected real levels of production, consumption and investment in the economy, by this issue? Political shocks affect economic variables and developing a model to capture and also quantify these shocks can improve economic analysis. A very important question around this issue is after the shock relief what should policy maker do and which policy he supposed to make? This paper attempts to answer this question for Iran economy by developing a DSGE model. The result shows that expansionary monetary policy after sanction relief induces inflation and nominal interest increase. Contractionary fiscal policy (tax rate increase) in that situation implies not only labor supply decreasing but also capital and consumption falling.
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