Oil exports and the Iranian economy

Hadi Esfahani (), Kamiar Mohaddes and Mohammad Pesaran

The Quarterly Review of Economics and Finance, 2013, vol. 53, issue 3, 221-237

Abstract: This paper presents an error-correcting macroeconometric model for the Iranian economy estimated using a new quarterly data set over the period 1979Q1–2006Q4. It builds on a recent paper by the authors, Esfahani, Mohaddes, and Pesaran (in press), which develops a theoretical long-run growth model 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 analysed 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.

Keywords: Growth models; Long-run relations; Oil exporters; Iranian economy; Oil price and foreign output shocks; Error-correcting relations (search for similar items in EconPapers)
JEL-codes: C32 C53 E17 F43 F47 Q32 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (60)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976912000464
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Oil Exports and the Iranian Economy (2010)
Working Paper: Oil Exports and the Iranian Economy (2009)
Working Paper: Oil Exports and the Iranian Economy (2009)
Working Paper: Oil Exports and the Iranian Economy (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:53:y:2013:i:3:p:221-237

DOI: 10.1016/j.qref.2012.07.001

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().