Abstract

Oil revenue fluctuations and Dutch disease (i.e. development of the non-traded services sector at the expense of traded sectors of agriculture and industry) are two manifestations of the resource curse.  In this article we study the resource curse in Iran through looking at the impact of fluctuations in oil prices on the industry and mines, agriculture and services sectors of the Iranian economy over the period 1973 to 2011.

We first estimate oil price fluctuations through use of the GARCH model.  We then use an ARDL model to estimate the short and long term impact of oil price fluctuations on the value added of the industry, agriculture and services sectors. We use an ECM model to assess the relationship between short and long term changes. Our results indicate that oil price fluctuations negatively impact the agriculture and industry sectors and have positive effects on the services sector.

JEL Classification : C22, Q31, Q32