The Role of National Development Fund in Confrontation Oil Shocks in Iran Economy from Government Expenditure Channel by Using a Dynamic Stochastic General Equilibrium Model

Document Type : Research Article

Authors

1 PhD student in Economics, Ferdowsi University of Mashhad

2 Professor of Economics, Ferdowsi University of Mashhad

3 Professor of Economics, University of Tehran

Abstract

The aim of this study is to assess the effects of oil shocks on economic variables of Iran as an oil exporting country with a National Development Fund. For this purpose, in case that the government relies heavily on oil revenue, we provide a dynamic stochastic general-equilibrium (DSGE) model. In the following, we study two different policy for oil revenue volatility and provid a dynamic stochastic general-equilibrium model for policy A and B and estimate them. The results of the paper shows when the government saves its oil revenue in an oil fund and invests each period only the return from the fund plus a small additional fraction, the shock generates a milder and more long-lasting expansion, efectively insulating the economy from the volatility of oil prices.

Keywords

References

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Journal of Applied Economics Studies in Iran
Volume 9, Issue 33
April 2020
Pages 57-91

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