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An Analysis of the Impact of Oil Revenues on Iranian Economy A Case Study of Dutch Disease
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Parvaneh Jahani Raeini *   , Amir Mortazavi , Mohammad Mahdi Mojahedi |
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Abstract: (24854 Views) |
| The theoretical foundations of the Dutch Disease are considered in this paper, and using the appropriate indices its existence in Iranian economy is tested. On the basis of theoretical considerations, the initial impact of injecting foreign exchanges derived from exporting raw materials is the strengthening of the national currency and the growth of the money supply within the national economy. This will not only induce higher levels of aggregate consumption but will also, in conjunction with the non-optimal structure of the production system, increase the fixed cost of capital and the nominal money cost of the production by increasing the ratio of the price index for non-tradable goods to that of the tradables. The above-mentioned factors, together with the incompetitiveness of domestic industrial products are usually referred to as the symptoms of Dutch Disease.
One of the main and significant indices for testing the existence of Dutch Disease from the theoretical and statistical points of view is the ratio of the price index of non-tradable goods to that of the tradables. Unfortunately, the statistical data for such a dichotomy does not exist in Iran. The statistical data derived from a proxy index indicates that with the growth of oil export revenues the ratio of the price indices of tradable goods to the non-tradables, which have experienced smooth growth during the past years, have recently shown accelerations. This signifies and supports the hypothesis of the existence of a mild Dutch Disease in Iranian economy especially during the recent years, though the reservation exists as to the concrete conclusions based on its existence. |
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| Keywords: Dutch Diseases, Iranian Economy, Oil Revenues, The Price Ratio of Tradable Goods to Non-Tradables |
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Full-Text [PDF 313 kb]
(10015 Downloads)
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Type of Study: Research |
Subject:
General
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