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The effects of oil price shocks on the Iranian economy

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  • Farzanegan, Mohammad Reza
  • Markwardt, Gunther

Abstract

The Iranian economy is highly vulnerable to oil price fluctuations. This paper analyzes the dynamic relationship between oil price shocks and major macroeconomic variables in Iran by applying a VAR approach. The study points out the asymmetric effects of oil price shocks; for instance, positive as well as negative oil price shocks significantly increase inflation. We find a strong positive relationship between positive oil price changes and industrial output growth. Unexpectedly, we can only identify a marginal impact of oil price fluctuations on real government expenditures. Furthermore, we observe the "Dutch Disease" syndrome through significant real effective exchange rate appreciation.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 31 (2009)
Issue (Month): 1 (January)
Pages: 134-151

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Handle: RePEc:eee:eneeco:v:31:y:2009:i:1:p:134-151

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Web page: http://www.elsevier.com/locate/eneco

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Keywords: Macroeconomic fluctuations Oil price shocks Developing economies Iran VAR modelling;

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