Naser Khiabani; Hossein Amiri
Volume 14, Issue 54 , October 2014, , Pages 133-173
Abstract
The purpose of this paper is to examine the impact of crude oil production and price shocks on the monetary, fiscal and macroeconomic variables in the framework of new Keynesian open economy DSGE model for Iran.Accordingly, the paper estimates a DSGE model composed of households, firms, foreign trade ...
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The purpose of this paper is to examine the impact of crude oil production and price shocks on the monetary, fiscal and macroeconomic variables in the framework of new Keynesian open economy DSGE model for Iran.Accordingly, the paper estimates a DSGE model composed of households, firms, foreign trade and consolidated accounts of government and central bankfor the Iran economy to be calibrated and simulated. The results of simulation and analysis of impulse response function indicate that the effects of crude oil prices and production shocks on investment, national output, marginal costs of production and inflation are positive and significant. They also show that the shocks have significantly positive effects on government spending, tax revenues and the monetary base. The findings suggest that monetary and fiscal policies in Iran are mainly formed by oil revenue due to the dependency of public budget through the currency obtained from oil export revenues. The results indicate that oil revenue is both a blessing and a curse for the economy. The results stress to reduce the dominance of government on oil revenues, government tax budgeting and limit the government’s access to foreign currency reserves
