Document Type : Research Paper


1 Assistant Professor, Faculty of Social Science and Economics, Al-Zahra University

2 PhD Student in Economics, Al-Zahra University


Oil revenues play an important role in the political economy of Iran. In this study we analyze the asymmetric effects of oil price shocks on government expenditures and investment for the period of 1978-2008. We Apply the VAR model and impulse response functions (IRFs). The main result shows that oil shocks have asymmetric effects. It means that the effect of negative shocks on government expenditures and investment is larger than positive shocks. The results show that oil shocks have asymmetric effect on government expenditures and confirm the existence of Dutch-Disease and high dependency to oil revenues in Iranian economy.  The use of stabilization and savings funds and diversification of the revenues of oil sector seems crucial to minimize the harmful effects of oil booms and busts.


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