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The effects of oil price shocks on the Iranian economy

  • Farzanegan, Mohammad Reza
  • Markwardt, Gunther

The Iranian economy is highly vulnerable to oil price fluctuations. This paper analyzes the dynamic relationship between oil price shocks and major macroeconomic variables in Iran by applying a VAR approach. The study points out the asymmetric effects of oil price shocks; for instance, positive as well as negative oil price shocks significantly increase inflation. We find a strong positive relationship between positive oil price changes and industrial output growth. Unexpectedly, we can only identify a marginal impact of oil price fluctuations on real government expenditures. Furthermore, we observe the Dutch Disease syndrome through significant real effective exchange rate appreciation.

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Paper provided by Dresden University of Technology, Faculty of Business and Economics, Department of Economics in its series Dresden Discussion Paper Series in Economics with number 15/08.

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Date of creation: 2008
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Handle: RePEc:zbw:tuddps:1508
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