Senario-Making for Impacts of Iran's Oil Revenue Investment Shock on Agriculture, Industry and Services: RDCGE Model Approach

Given the importance role of oil export revenues in the whole dimensions of economy of oil exporting developing countries (government budget, GDP growth rate, investment, saving rate, inflation rate, unemployment rate, poverty alleviation, etc.), this study aimed at investigating and simulating the impact of the oil revenues investing shocks on Iran's economic sectors (i.e. Agriculture, Industry and Services) through nine scenarios including the savings of the oil export revenues in national development fund (20, 50 and 80 percent) and the growth in total efficiency of production factors (5, 8 and 10 percent).The required data were seasonally collected from Central Bank of Iran (CBI) and Statistical Center of Iran (SCI) during 1991-2016. For data analysis, the Mathlab software and Recursive Computable General Dynamic Equivalent (RDCGE) model were applied. Also, the model was calibrated using the social accounting matrix related to the base year of 2011 and basic scenario (saving 20 percent of oil export revenues in national development fund and 5 percent of growth in total efficiency of production factors). Results of Impulse Response Functions (IRF) showed that a positive shock in basic scenario on oil export revenues caused an investment reduction in agriculture and industry sectors while an investment increase in services sector, indicating the existence of Dutch disease in Iran's economy; but during an increase in saving the oil export revenues in national development fund by 50 percent, the effect of Dutch disease would reduce and increasing the share of saving the oil export revenues in national development fund by 80 percent would remove the effect of Dutch disease; in addition, increasing the growth in total efficiency of production factors would increase the investment in the mentioned sectors.