MACROECONOMETRIC MODELLING IN AN OIL EXPORTING COUNTRY: THE CASE OF IRAN

Abbas Valadkhani

Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia

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.

Keywords: Macroeconometric modelling; Iranian economy; Oil exporting countries (search for similar items in EconPapers)
JEL-codes: B23 C51 C52 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2007
New Economics Papers: this item is included in nep-ene
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Working Paper: Macroeconometric Modelling in an Oil-Exporting Country: The case of Iran (2006)
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