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Macroeconometric Modelling In An Oil Exporting Country: The Case Of Iran

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Abstract

The critical review undertaken in this paper pinpoints some of the major deficiencies and the strength of the earlier macroeconometric models (MEMs) constructed for Iran as a major oil exporting country. In constructing a new MEM, the flaws of past MEMs should be rectified and their strengths need to be retained. Most of the equations in these models are directly and indirectly affected by oil and gas exports and/or value added in the oil sector. Two dualities are observed in most models, viz. the traditional duality of the agriculture sector and industrial modern sector, and the oil duality featured by an enclave modern oil sector with negligible links to the rest of the economy. Similar to the MEMs constructed for other developing countries, only a few models have been subject to various parametric and diagnostic tests prior to their release. Not all model-builders tested for a simultaneity problem in determining the estimation method. In future MEMs substantial attention should be placed on the equations for capital formation, price, wage, investment, exchange rate, unemployment, channels of distribution and demographic characteristics. It appears that the majority of the earlier models suffered from excessive "Keynesianism", which means the modellers gave insufficient attention to the role of the supply side in the long run.

Suggested Citation

  • Valadkhani, Abbas, 2007. "Macroeconometric Modelling In An Oil Exporting Country: The Case Of Iran," Economics Working Papers wp07-14, School of Economics, University of Wollongong, NSW, Australia.
  • Handle: RePEc:uow:depec1:wp07-14
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    File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow038117.pdf
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    References listed on IDEAS

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    1. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
    2. Valadkhani, Abbas, 2004. "History of macroeconometric modelling: lessons from past experience," Journal of Policy Modeling, Elsevier, vol. 26(2), pages 265-281, February.
    3. Francis X. Diebold, 1998. "The Past, Present, and Future of Macroeconomic Forecasting," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 175-192, Spring.
    4. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
    5. Ronald G. Bodkin & Lawrence R. Klein & Kanta Marwah, 1991. "A History of Macroeconometric Model-Building," Books, Edward Elgar Publishing, number 51.
    6. Corden, W M, 1984. "Booming Sector and Dutch Disease Economics: Survey and Consolidation," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 359-380, November.
    7. Aghevli, Bijan B. & Sassanpour, Cyrus, 1982. "Prices, output and the trade balance in Iran," World Development, Elsevier, vol. 10(9), pages 791-800, September.
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    Keywords

    Macroeconometric modelling; Iranian economy; Oil exporting countries;

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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