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Investigating the effects of electricity price reform on macroeconomic variables and adopting an appropriate stabilization policy using a computable general equilibrium model
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Mojtaba Bahmani   |
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Abstract: (179 Views) |
The electricity price in Iran has been kept well below the equilibrium level due to the energy price structure thanks to the extensive subsidies, which has led to inefficiency in resource allocation and pressure on the government budget. Consequently, the present study aims to examine the effects of electricity price reform along with tax policies on Iran's macroeconomic variables, including inflation, GDP, exports and imports. The scenarios are analysed using the computable general equilibrium (CGE) model and based on version 11 of the GTAP database, which includes the social accounting matrix of 160 regions with the base year 2017. The results indicate that the increase in electricity prices has a direct relationship with inflation and an inverse relationship with production and foreign trade; in a way that the greater the intensity of the price shock, the deeper the inflationary pressure and the wider the economic recession. The results also reveal that while technological progress can play a mitigating role alongside a doubling of electricity prices, the selection of appropriate stabilization policies is crucial for achieving sustainable growth and overcoming the negative effects of shocks. An ineffective policy, such as a tax on labour income, is unable to drive the economy out of inflationary stagnation. In contrast, a capital tax policy is an effective strategy for the transition from inflationary stagnation to sustainable growth. By stimulating investment, this policy not only significantly increases GDP and exports, but also, by increasing the total supply of the economy, is able to moderate inflationary pressure in the long run and guide the economy towards higher levels of welfare and stability. The results of the CGE model simulation indicate that electricity price reform should be carried out gradually and together with the implementation of a capital tax policy; this combination will mitigate the negative effects of the price increase and strengthen sustainable economic growth by stimulating productive investments.
JEL Classification: D58, I31, C68, D63.
Keywords: Energy price reform, Stabilization economic policy, CGE Model, Iran’s Economy.
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| Keywords: JEL Classification: D58, I31, C68, D63.
Energy price reform, Stabilization economic policy, CGE Model, Iran’s Economy. |
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Full-Text [PDF 1387 kb]
(37 Downloads)
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Type of Study: Thesis(PhD.) |
Subject:
اقتصادبرق و مهندسي برق-مهندسي
Received: 2025/11/4 | Accepted: 2026/03/11 | Published: 2025/10/2 | ePublished: 2025/10/2
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