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Oil Export and the Economy of Iran (in Persian)

Author

Listed:
  • Pesaran, Mohammad Hashem

    (Iran)

  • Salehi Esfahani, Hadi

    (Iran)

  • Mohaddes, Kamiar

    (Iran)

Abstract

This paper presents an error-correcting macro-econometric model for the Iranian economy using a new quarterly data set over the period 1979Q1–2006Q4. It builds on a theoretical long-run growth model developed by the authors for major oil exporting economies. The core variables included in this paper are real output, real money balances, inflation, exchange rate, oil exports, and foreign real output, although the role of investment and consumption are also analyzed in a sub-model. The paper finds clear evidence for the existence of two long-run relations: an output equation as predicted by the theory and a standard real money demand equation with inflation acting as a proxy for the (missing) market interest rate. The results show that real output in the long run is influenced by oil exports and foreign output. However, it is also found that inflation has a significant negative long-run effect on real GDP, which is suggestive of economic inefficiencies and is matched by a negative association between inflation and the investment–output ratio. Finally, the results of impulse responses show that the Iranian economy adjusts quite quickly to the shocks in foreign output and oil exports, which could be partly due to the relatively underdeveloped nature of Iran’s financial markets.JEL Classification: P36, B22, F14, C2, E4

Suggested Citation

  • Pesaran, Mohammad Hashem & Salehi Esfahani, Hadi & Mohaddes, Kamiar, 2012. "Oil Export and the Economy of Iran (in Persian)," Journal of Monetary and Banking Research (فصلنامه پژوهش‌های پولی-بانکی), Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 4(12), pages 1-18, September.
    • Handle: RePEc:mbr:jmbres:v:4:y:2012:i:12:p:1-18
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    More about this item

    Keywords

    Oil Exporting Economics; Macroeconomic; Iranian Economy; Market Interest Rate; Vector Error Correction Model;
    All these keywords.

    JEL classification:

    • P36 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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