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Oil revenue shocks and government spending behavior in Iran

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  • Farzanegan, Mohammad Reza

Abstract

Oil revenues play an important role in the political economy of Iran. On average, 60% of the Iranian government revenues and 90% of export revenues originate from oil and gas resources. Current international sanctions on Iran have mainly targeted the oil production capacity of Iran and its exports to the global markets. In this study, we analyze the dynamic effects of oil shocks on different categories of the Iranian government expenditures from 1959 to 2007, using impulse response functions (IRF) and variance decomposition analysis (VDC) techniques. The main results show that Iran's military and security expenditures significantly respond to a shock in oil revenues (or oil prices), while social spending components do not show significant reactions to such shocks.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 6 ()
Pages: 1055-1069

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Handle: RePEc:eee:eneeco:v:33:y:2011:i:6:p:1055-1069

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

Related research

Keywords: Oil shock; Government expenditures; VAR model; Impulse response; Sanctions; Iran;

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Cited by:
  1. Mohammad Reza Farzanegan, 2012. "Does the Iranian oil supply matter for the oil prices?," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201232, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  2. Bjorvatn, Kjetil & Farzanegan, Mohammad Reza & Schneider, Friedrich, 2012. "Resource Curse and Power Balance: Evidence from Oil-Rich Countries," World Development, Elsevier, vol. 40(7), pages 1308-1316.
  3. repec:rej:journl:v:16:y:2013:i:49:p:3-26 is not listed on IDEAS
  4. Delavari, Majid & Gandali Alikhani, Nadiya, 2013. "The Dynamic Effects of Crude Oil and Natural Gas Prices on Iran's Methanol," MPRA Paper 49733, University Library of Munich, Germany.
  5. Mohammad Reza Farzanegan, 2014. "Can Oil-Rich Countries Encourage Entrepreneurship? ‘Yes’, ‘No’ but not ‘Perhaps’," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201406, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  6. Azarhoushang, Behzad & Rukavina, Marko, 2014. "Resource curse: A comparative study," IPE Working Papers 30/2014, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  7. Dizaji, Sajjad Faraji, 2014. "The effects of oil shocks on government expenditures and government revenues nexus (with an application to Iran's sanctions)," Economic Modelling, Elsevier, vol. 40(C), pages 299-313.
  8. Mohammad Reza Farzanegan & Sajjad Faraji Dizaji, 2014. "Political Institutions and Government Spending Behavior in Iran," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201403, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  9. Delavari, Majid & Gandali Alikhani, Nadiya & Naderi, Esmaeil, 2012. "The analyses of Crude Oil and Natural Gas Prices on Petrochemicals Products: A Case Study of IRAN's Methanol," MPRA Paper 48788, University Library of Munich, Germany.
  10. Farzanegan, Mohammad Reza, 2011. "Military spending and economic growth: the case of Iran," MPRA Paper 35498, University Library of Munich, Germany.
  11. Hamdi, Helmi & Sbia, Rashid, 2013. "Dynamic relationships between oil revenues, government spending and economic growth in an oil-dependent economy," Economic Modelling, Elsevier, vol. 35(C), pages 118-125.
  12. Feng, Zhuo & Zhang, Shui-Bo & Gao, Ying, 2014. "On oil investment and production: A comparison of production sharing contracts and buyback contracts," Energy Economics, Elsevier, Elsevier, vol. 42(C), pages 395-402.
  13. Delavari, Majid & Gandali Alikhani, Nadiya, 2012. "The Effect of Crude Oil Price on the Methanol price," MPRA Paper 49727, University Library of Munich, Germany.
  14. Mohammad Reza Farzanegan & Mozhgan Raeisian Parvari, 2014. "Iranian-Oil-Free Zone and International Oil Prices," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201427, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  15. Dizaji, S.F., 2012. "Exports, government size and economic growth (Evidence from Iran as a developing oil-export based economy)," ISS Working Papers - General Series, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague 535, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
  16. Dizaji, S.F. & van Bergeijk, P.A.G., 2012. "Early phase success and long run failure of economic sanctions. With an application to Iran," ISS Working Papers - General Series, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague 544, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
  17. Dizaji, S.F., 2012. "The effects of oil shocks on government expenditures and government revenues nexus in Iran (as a developing oil-export based economy)," ISS Working Papers - General Series, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague 540, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.

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