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Oil revenue shocks and government spending behavior in Iran

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Author Info

  • 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. 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 540, International Institute of Social Studies of Erasmus University (ISS), The Hague.
  2. Farzanegan, Mohammad Reza, 2012. "Does the Iranian oil supply matter for the oil prices?," MPRA Paper 36030, University Library of Munich, Germany.
  3. 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 535, International Institute of Social Studies of Erasmus University (ISS), The Hague.
  4. Farzanegan, Mohammad Reza, 2011. "Military spending and economic growth: the case of Iran," MPRA Paper 35498, University Library of Munich, Germany.

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