The Impact of Oil Revenues on the Iranian Economy and the Gulf States

23 Pages Posted: 7 May 2014

See all articles by Christian Dreger

Christian Dreger

European University Viadrina Frankfurt (Oder); IZA Institute of Labor Economics; Chinese Academy of Social Sciences (CASS)

Teymur Rahmani

University of Tehran

Multiple version iconThere are 3 versions of this paper

Date Written: March 2014

Abstract

In line with the neoclassical growth model a persistent stream of oil revenues might have a long lasting impact on GDP per capita in oil exporting countries through higher investment activities. This relationship is explored for Iran and the countries of the Gulf Cooperation Council (GCC) using (panel) cointegration techniques. The existence of cointegration between oil revenues, GDP and investment can be confirmed for all countries. While the cointegration vector is found to be unique for Iran, long run equations for GDP and investment per capita are distinguished for the Gulf countries. Both variables respond to deviations from the steady state, while oil income can be treated as weakly exogenous. The long run oil elasticities for the Gulf states exceed their Iranian counterparts. In addition, investment in Iran does not react to oil revenues in the long run. Hence, oil revenues may have been spent less wisely in Iran over the past decades.

Keywords: oil exporting countries, oil revenues, panel cointegration

JEL Classification: F43, O53, Q30, C33

Suggested Citation

Dreger, Christian and Rahmani, Teymur, The Impact of Oil Revenues on the Iranian Economy and the Gulf States (March 2014). DIW Berlin Discussion Paper No. 1369, Available at SSRN: https://ssrn.com/abstract=2432957 or http://dx.doi.org/10.2139/ssrn.2432957

Christian Dreger (Contact Author)

European University Viadrina Frankfurt (Oder) ( email )

Frankfurt (Oder)
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Chinese Academy of Social Sciences (CASS) ( email )

Beijing, 100732
China

Teymur Rahmani

University of Tehran ( email )

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