Oil income shocks and economic growth in Iran

The aim of this paper is to study the relationship between oil revenue shocks and output growth in Iran by Adopting an SVAR model over the period 1959-2008. The results indicate that positive and negative oil revenue shocks significantly affect output growth positively and negatively respectively and these effects are asymmetric. While negative oil revenue shocks adversely affect the economic growth, the resource curse impedes the expected positive effects of positive oil shocks. In order to overcome the harmful effects of oil booms and busts, the establishment of oil stabilization and saving funds, diversifying economy, delinking government expenditure from oil revenues and introducing fiscal rules into the budget seems crucial for Iran economy. (C) 2012 Elsevier B.V. All rights reserved.