Dynamic Effects of Oil Revenues on the Government Behavior in the Allocation of Consumption Expenditure on Public and Defense Affairs

Document Type : Review Article

Author

Assistant Professor of Economics, Faculty of Economics and Political Sciences, Shahid Beheshti University

Abstract

Oil revenues play an important role in the economy of Iran and on average, 56% of the Iranian government revenues originate from oil resources. Therefore, dependence of public budget on oil revenues, makes the unpopularity of of fiscal policies and periodic fiscal policies in the economy. Accordingly, the shock of oil revenues plays an important role on government's behavior in allocating consumption expenditure to social, economic, public and defense affairs. The aim of this study is to analyze the dynamic effects of oil revenues on the government behavior in the allocation of consumption expenditure to the social, economic, public and defense affairs in Iran, that using Vector Autoregressive model and impulse response functions (IRF) and variance decomposition analysis (VD) techniques in the period (1978-2015). The most important result of impulse response functions indicate that oil revenue shocks in the short run have a positive effect on the allocation of consumer spending in social, defense and public expenditure. Also, the results of of variance decomposition analysis indicate that oil revenue shocks have the largest share in change of economic expenditure, but had little effect on social and public expenditure.

Keywords

Main Subjects

References

Cavalcanti, T. and Jalles, J.T. (2013), "Macroeconomic effects of oil price shocks in Brazil and in the United States", Applied Energy, 104, 475–486.
Cologni, A, and Manera, M. (2008), "Oil Prices, Inflation and Interest Rates in a Structural Cointegrated VAR Model for G7 Countries", Energy Policy, Vol. 30, PP. 856-888.
Cologni, A., & Manera, M. (2013), "Exogenous oil shocks, Fiscal Policies and Sector Reallocations in Oil Producing Countries", Energy Economics,  35, PP. 42–57.
Chun, C.K.S., (2010), "Do oil exports fuel defense spending?", Strategic Studies Institute (SSI), United States Army War College.
Emami, K., & Adibpour, M. (2012), "Oil income shocks and economic growth in Iran", Economic Modelling, 29, PP.1774–1779.
Farzanegan, M.R. (2011), "Oil revenue shocks and government spending behavior in Iran", Energy Economics, 33, PP.1055–1069.
Farzanegan, M. R. & Markwardt, G. (2009), "The effects of oil price shocks on the Iranian economy", Energy Economics, 31, 134-151.
Moradi, M.A. (2009),"Oil Resource Abundance, Economic Growth and Income Distribution in Iran", www. Ecomod.org, Paper No: 990.
Olomola, P.A. & Adejumo, A".V. (2006), "Oil Price Stock and Macroeconomic Activities in Nigeria, International Research Journal of Finance and Economics, 3, pp. 28-34.
Reyes-Loya, M.L & Blanco, L. (2008), "Measuring the importance of oil-related revenues in total fiscal income for Mexico", Energy Economics, 30 (5), September 2008, Pages 2552–2568.
Sims, C.A. (1980), "Macroeconomics and reality",Econometrica, 48, pp.1-48.
Strum, M., Gurtner, F., Alegre, J.G., (2009), "Fiscal policy challenges in Oil-Exporting Countries: a review of key issues". European Central Bank: Occasional Paper Series, No. 104.
 

Files

Share

How to cite

Statistics