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Effect of Exogenous Oil Revenue Shocks on Reallocation of Public and Private Investments in Iran

Author

Listed:
  • Rouhollah Shahnazi

    (Assistant Professor, Department of Economics, Shiraz University, Shiraz, Iran)

  • Maryam Lashani Afrasiabi

    (M.S. Student, Department of Economics, Shiraz University, Shiraz, Iran)

Abstract

Determining the mechanism of oil shock effects on macroeconomic variables of oil-producing countries and incorporating these effects into the models that predict such variables is of utmost importance for the fiscal policy makers attempting to adopt appropriate policies to counter the shock induced volatilities. In this study, a dynamic stochastic general equilibrium (DSGE) model based on the real business cycle (RBC) theory is used to investigate the effect of oil revenue shocks on reallocation of private and public investment and the presence of resource curse in Iran s economy over the period 1974-2012. For this purpose, after estimating the model parameters and conducting a simulation, variables impulse response to shocks are plotted and analyzed. The results demonstrate the negative effects of positive oil shock on private sector, a substitution relation between public and private investment, and the presence of resource curse during this period of Iran s economy.

Suggested Citation

  • Rouhollah Shahnazi & Maryam Lashani Afrasiabi, 2018. "Effect of Exogenous Oil Revenue Shocks on Reallocation of Public and Private Investments in Iran," International Journal of Energy Economics and Policy, Econjournals, vol. 8(1), pages 27-37.
    • Handle: RePEc:eco:journ2:2018-01-5
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    Cited by:

    1. Taheri, Abouzar & Nessabian, Shahriyar & Moghaddasi, Reza & Arbabi, Farzin & Damankeshideh, Marjan, 2020. "Business Cycles in Some Selected Oil Producing Countries: Iran versus Three OECD Members," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 27(1).
    2. Sugra Humbatova & Afag Huseyn & Natig Gadim-Oglu Hajiyev, 2023. "Impact of Oil Factor on Investment: The Case of Azerbaijan," International Journal of Energy Economics and Policy, Econjournals, vol. 13(2), pages 129-148, March.

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    More about this item

    Keywords

    Real Business Cycle; Oil Shock; Substitution Relation; Resource Curse;
    All these keywords.

    JEL classification:

    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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