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The Impact of Oil Revenues on the Iranian Economy and the Gulf States

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  • Christian Dreger
  • Teymur Rahmani

Abstract

In line with the neoclassical growth model a persistent stream of oil revenues might have a long lasting impact on GDP per capita in oil exporting countries through higher investment activities. This relationship is explored for Iran and the countries of the Gulf Cooperation Council (GCC) using (panel) cointegration techniques. The existence of cointegration between oil revenues, GDP and investment can be confirmed for all countries. While the cointegration vector is found to be unique for Iran, long run equations for GDP and investment per capita are distinguished for the Gulf countries. Both variables respond to deviations from the steady state, while oil income can be treated as weakly exogenous. The long run oil elasticities for the Gulf states exceed their Iranian counterparts. In addition, investment in Iran does not react to oil revenues in the long run. Hence, oil revenues may have been spent less wisely in Iran over the past decades.

Suggested Citation

  • Christian Dreger & Teymur Rahmani, 2014. "The Impact of Oil Revenues on the Iranian Economy and the Gulf States," Discussion Papers of DIW Berlin 1369, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp1369
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    Cited by:

    1. Jomar Patricia De Avila Arroyo & Milton Yago & Muhammad Ali Nasir & Junjie Wu, 2014. "Strategic Alliance in Energy Sector & Implications for Economic Growth and Technical Efficiency: The Case of Petrobras and Galp," International Journal of Energy Economics and Policy, Econjournals, vol. 4(4), pages 759-771.

    More about this item

    Keywords

    Oil exporting countries; oil revenues; panel cointegration;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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