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A general equilibrium analysis of the inflationary impact of energy subsidies reform in Iran

Author

Listed:
  • Hossein Mirshojaeian Hosseini
  • Shinji Kaneko

    (Graduate School for International Development and Cooperation, Hiroshima University)

Abstract

Iran has suffered ever-increasing domestic energy consumption mostly due to its price controlling policy. If the trend continues, it will become a pure importer in the following decades. To avoid that unlucky fate, Iran started the energy subsidies reform on December 2010. It increased domestic energy and agricultural prices up to 20 times, making it the first major oil-exporting country to reduce substantially implicit energy subsidies. The paper studies the inflationary impact of the energy subsidies reform on different non-energy sectors and urban and rural households in Iran. For this purpose, the input-output price model of Iran is made and energy cross-price elasticities of non-energy sectors are derived. The results evidence the tremendous effects of the complete reform on the production and consumption prices.

Suggested Citation

  • Hossein Mirshojaeian Hosseini & Shinji Kaneko, 2012. "A general equilibrium analysis of the inflationary impact of energy subsidies reform in Iran," IDEC DP2 Series 2-8, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
    • Handle: RePEc:hir:idecdp:2-8
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    File URL: http://ir.lib.hiroshima-u.ac.jp/files/public/32210/20141016185530813346/IDEC-DP2_02-8.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Energy subsidies reform; Production and consumption prices; Iran; Input-output price model; Decomposition;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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