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Investigating Economic Effects of Oil Export Reduction: A Financial Computable General Equilibrium Approach

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  • Haqiqi, Iman
  • Bahador, Ali

Abstract

In this paper, using a static Financial Computable General Equilibrium (FCGE) model we investigate the effects of oil export decline on GDP, private consumption, investment, government expenditure and production of different sectors in Iran's economy. We consider zero profit conditions, market clearance, income balances, flexibility of government expenditures, imperfect mobility of labor across sectors, imperfect substitution of domestic and foreign goods, firms and households maximization based on CES functional forms. We calibrate our model based on Iran's Social Accounting Matrix (SAM) provided by central bank, which presents economic transactions data of 47 activities, 112 goods and services, 7 financial assets and 5 institutions. Our simulations shows that 50 percent reduction in oil export results 6.22, 4.9 and 13.63 percent reduction respectively in the level of GDP, private consumption and government expenditure, while in this scenario non-oil export shows 18.49 percent expansion. We also provide sensitivity analysis to support our findings.

Suggested Citation

  • Haqiqi, Iman & Bahador, Ali, 2015. "Investigating Economic Effects of Oil Export Reduction: A Financial Computable General Equilibrium Approach," MPRA Paper 95784, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:95784
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    References listed on IDEAS

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    1. P. A. Black & H. Cooper, 1987. "On the Welfare and Employment Effects of Economic Sanctions," South African Journal of Economics, Economic Society of South Africa, vol. 55(1), pages 1-8, March.
    2. Rutherford, Thomas F, 1999. "Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and Syntax," Computational Economics, Springer;Society for Computational Economics, vol. 14(1-2), pages 1-46, October.
    3. Marco Fugazza & Jean-Christophe Maur, 2008. "Non-Tariff Barriers In Computable General Equilibrium Modelling," UNCTAD Blue Series Papers 38, United Nations Conference on Trade and Development.
    4. P. A. Black & J. H. Cooper, 1987. "On the Welfare and Employment Effects of Economic Sanctions: Reply," South African Journal of Economics, Economic Society of South Africa, vol. 55(3), pages 196-197, September.
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    Cited by:

    1. Haqiqi, Iman & Yasharel, Sepideh, 2018. "Removing Fossil Fuel Subsidies to Help the Poor," MPRA Paper 95907, University Library of Munich, Germany.
    2. Aghababaei, Mohammad Ebrahim, 2019. "General Equilibrium Resource Elasticity in an Open Resource-Abundant Economy," MPRA Paper 97851, University Library of Munich, Germany.
    3. Haqiqi, Iman & Manzoor, Davood, 2012. "Environmental Impacts of Phasing out Energy Subsidies," MPRA Paper 95688, University Library of Munich, Germany, revised 2016.
    4. Haqiqi, Iman & Bahalou, Marziyeh & Hamidi, Razieh, 2014. "Measurement and Evaluation of Equality of Opportunity: A Numerical Look at Education, Health, and Income Inequality," MPRA Paper 95866, University Library of Munich, Germany.

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    More about this item

    Keywords

    Trade barriers; Financial general equilibrium; financial markets; Social Accounting Matrix;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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