This paper develops an advanced Dynamic Stochastic General Equilibrium (DSGE) model tailored to the structural characteristics of Iran’s economy. The model incorporates a dual exchange rate system, international sanctions, a large informal sector, and fuel subsidy reforms—features often omitted in standard DSGE frameworks. We estimate the model using Bayesian methods with Iranian macroeconomic data and external forecasts. Our results show significant improvements in forecasting performance and policy analysis, particularly for scenarios involving sanctions relief, subsidy reforms, and exchange rate unification. The model provides a rigorous yet adaptable framework for understanding and predicting Iran’s economic dynamics under structural and policy shocks.

DSGE Iran dual exchange rates economic sanctions informal economy subsidy reform Bayesian estimation forecasting.