Investigating the Effect of Gasoline Price Shock on Exchange Rate, Inflation, and Economic Growth in Iran: An Application of Structural Vector Autoregression Method


Articles in Press, Accepted Manuscript
Available Online from 25 February 2026

Document Type : Research Paper

Author

Assistant Professor of Economics, Faculty of Literature and Humanities, University of Birjand, Birjand, Iran.

Abstract
Making gasoline prices realistic and reducing gasoline subsidies to address the energy imbalance and reduce the government's budget deficit is one of the issues that is heard in economic policy circles today. The lack of a gasoline price increase for 6 years has strengthened the expectation of a price increase and a reduction in gasoline subsidies among the public and economic activists. The importance of the issue of gasoline prices and the shock resulting from its price increase on the Iranian economy is such that it has doubled the governments' concerns about the emergence of social tensions. Therefore, the dimensions of the impact of this issue on the macroeconomic variables of the Iranian economy, including the inflation rate, exchange rate, and economic growth rate, should be considered with greater sensitivity in studies. Therefore, in this study, the effect of the gasoline price increase shock on macroeconomic variables during the years 1979 to 2024 is examined using the structural vector auto regression (SVAR) method. The results of the study indicate that the increase in gasoline prices, on average in the long and short term, accounts for 1.4, 0.27, and 1.6 percent of the changes in inflation, exchange rate, and economic growth rates, respectively, due to the gasoline price shock. Therefore, the government should be fully aware of the way gasoline prices affect exchange rate, inflation, and economic growth rates in order to analyze their negative effects on the economic and social fabric of society.

Keywords

Subjects
  • Receive Date 14 July 2025
  • Revise Date 27 August 2025
  • Accept Date 03 September 2025
  • First Publish Date 25 February 2026
  • Publish Date 25 February 2026