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Investigating Economic Effects of Oil Export Reduction: A Financial Computable General Equilibrium Approach

Iman Haqiqi and Ali Bahador

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, using a static Financial Computable General Equilibrium (FCGE) model we investigate the effects of oil export decline on GDP, private consumption, investment, government expenditure and production of different sectors in Iran's economy. We consider zero profit conditions, market clearance, income balances, flexibility of government expenditures, imperfect mobility of labor across sectors, imperfect substitution of domestic and foreign goods, firms and households maximization based on CES functional forms. We calibrate our model based on Iran's Social Accounting Matrix (SAM) provided by central bank, which presents economic transactions data of 47 activities, 112 goods and services, 7 financial assets and 5 institutions. Our simulations shows that 50 percent reduction in oil export results 6.22, 4.9 and 13.63 percent reduction respectively in the level of GDP, private consumption and government expenditure, while in this scenario non-oil export shows 18.49 percent expansion. We also provide sensitivity analysis to support our findings.

Keywords: Trade barriers; Financial general equilibrium; financial markets; Social Accounting Matrix (search for similar items in EconPapers)
JEL-codes: C67 C68 F10 F14 G11 (search for similar items in EconPapers)
Date: 2015
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Published in Journal of Monetary and Banking Research 1.24(2015): pp. 251-284

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