Fardin Farahnak; Majid Maddah; Abbas Shakeri
Abstract
Oil and Gas sector, with notable participation in national product and funding public expenditures, plays a seminal role in Iran's economy. Although there is a relative lag in providing proportionate supply, Iran stands at the highest rank of owning world's related proven reserves. Using a Computable ...
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Oil and Gas sector, with notable participation in national product and funding public expenditures, plays a seminal role in Iran's economy. Although there is a relative lag in providing proportionate supply, Iran stands at the highest rank of owning world's related proven reserves. Using a Computable General Equilibrium (CGE) model, this study was aimed to investigate the effects of the increase in the acquisition rate of Iran's oil and gas upstream affairs from oil revenues on GNP and public budget, which are supposed to help the government keep its main obligations often funded from oil revenues. By applying the 18% gain, instead of the current 14.5%, to the oil and gas upstream affairs, short-run recession against long-run booming effects would emerge. Accordingly, maintaining the initial level of either the Public Goods and Services (PGS) output or Government Financial Supports on PGS, GNP could boost up to 5% with over 15% of required contraction in the public budget. On the contrary, maintaining the initial level of either the Transfer Payments or Transfer Payments and Financial Supports on PGS (simultaneously), GNP would rise only 1%, due to the negligible required contraction in the public budget. Therefore, allocating more oil revenues to developing upstream affairs (even under the presence of the contemporary main obligations) is recommended due to its potential to spur notable growth in GNP.
Hiva Rahiminia; Beitollah Akbari Moghada; Mohammad Reza Monjazeb
Abstract
Despite the implementation of the first phase of fuel subsidy targeting in December 2010, there are still debates over the economic impact of this project in Iran. A CGE model is used to analyze the impact of fuel subsidy targeting in Iran in four different scenarios. The data are used in the framework ...
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Despite the implementation of the first phase of fuel subsidy targeting in December 2010, there are still debates over the economic impact of this project in Iran. A CGE model is used to analyze the impact of fuel subsidy targeting in Iran in four different scenarios. The data are used in the framework of SAM for the year 2001. In all scenarios, indirect subsidies are removed completely and replared with direct subsidies to households, manufacturing and service sectors and government institutions. The findings of this paper show that the effect of fuel subsidy targeting on economic variables depends on the way this policy is implemented. We find that an increase in the income of low-income household results in an increase in the production level of basic goods. Moreover, the result shows that the mining industry, glass and other non-metallic minerals and other service sectors have comparative advantages. In all senatrios, the elimination of in direct subsidies results in stagflation. The inflation rate resulted from this policy is predicted to be between 16.1 to 21.1 percent. Furthermore, in all senariors, higher direct payments of subsidies to households are associated with higher growth and inflation rates and lower balance of payments.