Volume 20, Issue 3 (2020)                   QJER 2020, 20(3): 111-144 | Back to browse issues page

XML Persian Abstract Print


Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:

Dehghan Manshadi M, ESLAMLOUEYAN K, Hadian E, Dehghan Shabani Z. Oil Shocks, Institutional Quality Change and Macroeconomic Dynamics in Iran. QJER 2020; 20 (3) :111-144
URL: http://ecor.modares.ac.ir/article-18-36169-en.html
1- Shiraz University
2- Dept. of Economics, Shiraz University , keslamlo@rose.shirazu.ac.ir
Abstract:   (2976 Views)
The interaction between institutional quality and the mechanism of oil shock diffusion might have a significant effect on macroeconomic dynamics in an oil-exporting country. The literature lacks a formal model to address the role of institutional quality in the economic performance of an oil-rich developing economy. Using a new Keynesian dynamic stochastic general equilibrium (DSGE) framework, this study develops a model to investigate the response of macroeconomic variables to changes in institutional quality resulted from oil shocks in Iran as an important oil-exporting country. Our modeling allows us to show how institutional quality and oil revenues affect households, firms, government, and the central bank. The model is solved and calibrated for the period 1959-2017. The results indicate that the destruction of institutional quality caused by a positive oil shock prevents the Iranian economy from reaping the fruits of an increase in oil revenues. Oil revenues and their shocks by destroying the institutional quality through the expansion of rent-seeking activities, increasing transaction costs of production, reducing the impact of government spending, and diverting monetary and fiscal policies from the targets result in negative effects on Iran's non-oil production in the long run.To reduce the destructive effects of oil shocks on institutional quality in the Iranian economy, we suggest the policymakers in Iran reduce the dependency of the government budget on oil revenues.
Full-Text [PDF 1294 kb]   (1163 Downloads)    
Article Type: Original Research | Subject: Economics and Econometrics
Received: 2019/09/3 | Accepted: 2019/12/28 | Published: 2020/09/19

Add your comments about this article : Your username or Email:
CAPTCHA

Send email to the article author


Rights and permissions
Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.