Simulation of Scenarios for Using Iran Oil Revenues Based on Advanced Econometric Model
22 Pages Posted: 27 Jul 2020 Publication Status: Under Review
This paper presents a model for macroeconomics in Iran and, based on it, simulates and analyzes the scenarios of how to use the oil revenues. The model does not limit some general variables and, by addressing the labor market variables and price levels, it goes beyond basic models and approaches total supply and demand patterns. Another innovation in the article is the use of seasonal data (1986-2016) and the Vector Error Correction Model which enables the generalization of the results to both short-term and long-term channels. In order to analyze Iran's economic behavior and better decision making on how to use the oil revenues, overall consumption scenarios and the absence of using oil revenues in the country's budget and mid-scenarios use 70 percent and 30 percent of oil revenues are simulated at government expense. Non-use scenarios and limited use of oil revenues lead to a decline in the economic growth. Only 70 percent of the oil revenue scenario, coupled with an increase in GDP and economic activity, reduces unemployment and puts a sustainable decline in the overall consumption scenario of all oil revenues.
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