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Original scientific paper

https://doi.org/10.18045/zbefri.2017.2.353

Oil price reduction impacts on the Iranian economy

Abdollah Mahmoodi orcid id orcid.org/0000-0002-6103-6141 ; Mahabad Branch, Islamic Azad University, Collage of Humanities,Mahabad, Western Azerbaijan, Iran


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Abstract

The aim of this study is to assess the impacts of oil price reduction on Iran’s
economy. In order to simulate this shock, the global trade analysis project (GTAP)
model with its data done by using. In the new created data aggregation, oil
exporting in Iran and the rest of the world countries as economic new regions, ten
new economic sectors have been created, among which the oil is introduced as one
sector as well as five endowments. The standard economic closure was changed,
and decline in world oil price was simulated in model as a policy shock. The
results show that oil export revenue and the mineral commodity export earnings
will decrease, but other production sectors’ exports will increase. The trade
balance of Iran will be affected negatively and strongly. Also, oil and other
services production decreased. In the production sectors’ market, the demand for
labor, natural resources, and investment decreased dramatically, and the demand
for land increased. Using equivalent variation (EV), changes in Iran’s welfare is
high negative. Finally, deflation, reduction in value and quantity of GDP and
changes in consumption combination from public to private sector are the other
economic impacts of reduction in oil price on Iran’s economic. It is suggested that
future studies are done using dynamic models and up-to-date data. In addition,
policy makers need to rebound internationally and within OPEC to raise oil
prices.

Keywords

oil price, Iran’s economy: consumption combination, welfare, labor market

Hrčak ID:

191387

URI

https://hrcak.srce.hr/191387

Article data in other languages: croatian

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