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Macroeconomic Implications Of Us Sanctions On Iran: A Sectoral Financial Balances Analysis

Author

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  • SIVRAMKRISHNA Sashi Kautilya

    (Entrepreneurship & Management Institute & Foundation to Aid Industrial Recovery,)

  • SHARMA Bhavish

    (Narsee Monjee Institute of Management Studies (NMIMS), Bengaluru)

Abstract

Iran is facing a severe macroeconomics crisis after the US (re)imposed sanctions on its oil and gas exports in May 2018, followed by additional sanctions on metal exports in 2019. Its exports have collapsed triggering a contraction of the economy along with accelerating inflation and depreciating currency. Using the sectoral financial balances (SFB) model, we study the interrelationship between several macroeconomic parameters maintaining stock-flow consistency across time and sectors of the economy. Fiscal and monetary policy cannot reverse the consequences of the sanctions although fiscal deficits as a percentage of GDP will see a rise to accommodate the domestic private sector’s desire to accumulate financial asset accumulation. The lack of a strong monetary policy mechanism in Iran may, however, be unable to quell the impact of expansionary fiscal policy on inflation and depreciating rial. Given the limited macroeconomic policy options open to Iran in dealing with the crisis Iran, the only option may be political – a return to the negotiating table with the US.

Suggested Citation

  • SIVRAMKRISHNA Sashi Kautilya & SHARMA Bhavish, 2019. "Macroeconomic Implications Of Us Sanctions On Iran: A Sectoral Financial Balances Analysis," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 14(3), pages 182-204, December.
    • Handle: RePEc:blg:journl:v:14:y:2019:i:3:p:182-204
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    Cited by:

    1. Anna A. Bakulina & Olga V. Panina & Stanislav E. Prokofiev & Natalia L. Krasyukova & Valery L. Abramov & Natalia V. Sergeeva & Olga V. Loseva & Tatiana G. Kasyanenko & Elena V. Takmakova, 2021. "The Black Sea Region Energy Cooperation: Current Trends and Prospects," International Journal of Energy Economics and Policy, Econjournals, vol. 11(4), pages 257-266.
    2. Ahmadi, Mohammad Mahdi & Keyhani, Alireza & Rosen, Marc A. & Lam, Su Shiung & Pan, Junting & Tabatabaei, Meisam & Aghbashlo, Mortaza, 2022. "Towards sustainable net-zero districts using the extended exergy accounting concept," Renewable Energy, Elsevier, vol. 197(C), pages 747-764.

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