Quarterly Publication

Document Type : Original Article

Author

Faculty member IRIB university

10.22050/pbr.2021.295077.1215

Abstract

Abstract:
The goal of this paper is to show asymmetric effect of oil shocks on Iranian economy. It uses non-linear time series models to investigate asymmetric effect of oil shocks on resource allocation in Iranian economy. The results show that negative oil shocks has been more persistent during last decades and had sever negative effect on resource allocation in Iranian economy and different oil shocks have different implications for importing and exporting countries and rigidity of state fiscal systems in exporting countries causes negative oil shocks to be more persistent. Oil economies response to positive and negative oil shocks depends on the structure of the economy. Government budget and trade balance have significant implications for the effects of oil shocks on oil exporting economies. Government budget is highly dependent on oil revenues, therefore in the case of negative oil shocks pass-through exchange rate pass-through will cause high inflation because of foreign exchange shortage and overshoot in exchange rate.

Keywords