Authors
Abstract
The present paper investigated the impact of oil revenue on the inflation and growth rates of Iran in the period of pre-exchange rate reform of 1993. In doing so, dynamic equations for growth, inflation, the exchange rate, money and foreign inflation were estimated. The equations were then used to run a number of simulations of inflation and growth. As a result, it was found out that oil revenue only influences growth by a slow direct effect. Inflation is influenced by oil revenue through a direct effect, foreign prices, and the real exchange rate. The net effect is that greater oil revenue has tended to reduce inflation, though the effect has been greatest since the revolution. A large part of the volatility in inflation and growth appears to be due to the variation in oil revenue rather than boom in themselves.
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