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The contribution of oil income and exchange rate shocks in Iran's budget deficit and trade deficit
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Mahbube Al-Sadat Amir Shakrami1   , Hossein Sharifi Renani *2 , Sara Ghobadi1 |
1- Department of Economics, Isfahan (Khorasgan) branch, Islamic Azad University, Isfahan, Iran
2- Department of Economics, Isfahan (Khorasgan) branch, Islamic Azad University, Isfahan, Iran , h.sharifi@khuisf.ac.ir |
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Abstract: (44 Views) |
today’s increasingly interconnected and globalized world, many countries are experiencing both internal and external imbalances. One of the most pressing of these is the current account imbalance, which has become a matter of concern for policymakers in several countries, including Iran. Although it can be theoretically argued that such concerns may be overstated, it is generally accepted that governments can address external imbalances through the effective implementation of sound fiscal policies, as budget deficits are often considered a fundamental driver of current account imbalances. The objective of this study is to analyse the relative impact of oil income shocks and exchange rate shocks on Iran’s budget and trade deficits. Using quarterly data from 2004 to 2022, the study employs Forecast Error Variance Decomposition (FEVD) to quantify the contribution of these shocks. The FEVD results from both models indicate that exchange rate shocks account for the largest share of variance in both the budget and trade deficits, with their effects being most pronounced in the short, medium and long run.
JEL Classification: F19, F32.
Keywords: shocks of oil income, shocks of exchange rate, budget deficit, trade deficit.
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| Keywords: JEL Classification: F19, F32.
shocks of oil income, shocks of exchange rate, budget deficit, trade deficit. |
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Full-Text [PDF 858 kb]
(74 Downloads)
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Type of Study: Thesis(PhD.) |
Subject:
Energy Economic
Received: 2025/05/1 | Accepted: 2025/08/30 | Published: 2026/04/30 | ePublished: 2026/04/30
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