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A Computable General Equilibrium Model of International Sanctions

Author

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  • M. Reza Gharibnavaz
  • Robert Waschik

Abstract

We detail recent international sanctions against the Iranian economy and its government. The effects of these sanctions on the Iranian economy, the Iranian government and rural and urban Iranian households disaggregated by income decile are modelled using a Computable General Equilibrium (CGE) model which uses endogenous taxes to simulate the effects of sanctions. Results suggest that sanctions on Iranian oil exports had a serious negative effect on the Iranian economy, with very strong negative changes on real revenue earned by the Iranian government, but much more limited effects on the well-being of Iranian rural and urban households.

Suggested Citation

  • M. Reza Gharibnavaz & Robert Waschik, 2015. "A Computable General Equilibrium Model of International Sanctions," Centre of Policy Studies/IMPACT Centre Working Papers g-255, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-255
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    References listed on IDEAS

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    1. Esfahani, Hadi Salehi & Mohaddes, Kamiar & Pesaran, M. Hashem, 2013. "Oil exports and the Iranian economy," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(3), pages 221-237.
    2. Drezner,Daniel W., 1999. "The Sanctions Paradox," Cambridge Books, Cambridge University Press, number 9780521644150, January.
    3. Alban Kitous & Bert Saveyn & Steve Gervais & Tobias Wiesenthal & Antonio Soria, 2013. "Analysis of the Iran Oil Embargo," JRC Research Reports JRC77983, Joint Research Centre.
    4. Drezner,Daniel W., 1999. "The Sanctions Paradox," Cambridge Books, Cambridge University Press, number 9780521643320, January.
    5. Shantayanan Devarajan & Lili Mottaghi, "undated". "Middle East and North Africa Quarterly Economic Brief, January 2014 : Growth Slowdown Heightens the Need for Reforms," World Bank Publications - Reports 18818, The World Bank Group.
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    7. Sajjad Faraji Dizaji & Peter A G van Bergeijk, 2013. "Potential early phase success and ultimate failure of economic sanctions," Journal of Peace Research, Peace Research Institute Oslo, vol. 50(6), pages 721-736, November.
    8. Neuenkirch, Matthias & Neumeier, Florian, 2015. "The impact of UN and US economic sanctions on GDP growth," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 110-125.
    9. Farzanegan, Mohammad Reza, 2011. "Oil revenue shocks and government spending behavior in Iran," Energy Economics, Elsevier, vol. 33(6), pages 1055-1069.
    10. Kaempfer, William H. & Lowenberg, Anton D., 2007. "The Political Economy of Economic Sanctions," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 2, chapter 27, pages 867-911, Elsevier.
    11. Carolyn Fischer & Alan K. Fox, 2007. "Output-Based Allocation of Emissions Permits for Mitigating Tax and Trade Interactions," Land Economics, University of Wisconsin Press, vol. 83(4), pages 575-599.
    12. Gary Clyde Hufbauer & Jeffrey J. Schott & Kimberly Ann Elliott, 2009. "Economic Sanctions Reconsidered, 3rd Edition (paper)," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 4129, April.
    13. Mohammad Reza Farzanegan & Mohammad Mohammadikhabbazan & Hossein Sadeghi, 2015. "Effect of Oil Sanctions on the Macroeconomic and Household Welfare in Iran: New Evidence from a CGE Model," MAGKS Papers on Economics 201507, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    14. Jeffrey J Schott, 2012. "Economic Sanctions Against Iran: Is the Third Decade a Charm?," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 47(3), pages 190-192, July.
    15. Burniaux, Jean-Marc & Truong Truong, 2002. "GTAP-E: An Energy-Environmental Version of the GTAP Model," GTAP Technical Papers 923, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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    Cited by:

    1. Ianchovichina,Elena & Devarajan,Shantayanan & Lakatos,Csilla, 2016. "Lifting economic sanctions on Iran : global effects and strategic responses," Policy Research Working Paper Series 7549, The World Bank.
    2. Konstantins Benkovskis & Eduards Goluzins & Olegs Tkacevs, 2016. "CGE model with fiscal sector for Latvia," Working Papers 2016/01, Latvijas Banka.

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    More about this item

    Keywords

    sanctions; oil; Iran; CGE model;
    All these keywords.

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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