Sustainability of Public Investment Approach for Management of Oil Revenues: The Case of IRAN
The present article adopts the new approach to fiscal policy in the commodity (oil) exporting developing countries to avoid the "Dutch Disease" phenomenon and instead guide the economy toward "Dutch Vigor" through “sustainability and scaling up of public investment”. This approac...
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| Format: | Article |
| Language: | fas |
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Allameh Tabataba'i University Press
2018-09-01
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| Series: | Pizhūhishnāmah-i Iqtiṣād-i Inirzhī-i Īrān |
| Subjects: | |
| Online Access: | https://jiee.atu.ac.ir/article_9837_6cf231a6a68ba76bad239cafb530e166.pdf |
| _version_ | 1797369277532078080 |
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| author | arash fakhrizadeh Hossein Tavakolian Seyyed Ahmad Reza Jalali Naini |
| author_facet | arash fakhrizadeh Hossein Tavakolian Seyyed Ahmad Reza Jalali Naini |
| author_sort | arash fakhrizadeh |
| collection | DOAJ |
| description | The present article adopts the new approach to fiscal policy in the commodity (oil) exporting developing countries to avoid the "Dutch Disease" phenomenon and instead guide the economy toward "Dutch Vigor" through “sustainability and scaling up of public investment”. This approach results in greater stability of the real exchange rate and economic growth. We cast this issue in the context of a multi-sector dynamic stochastic general equilibrium (DSGE) for the Iranian economy. Three fiscal rules are used to allocate oil revenues for saving, current government expenditures, and government investments. The allocation process is done in two stages. First, the share of oil revenues to a sovereign wealth fund (SWF) is determined. Second, the remainder is allocated between current and investment expenditures. We look for a smooth public investment path. By estimating the structural parameters of the model, the share of SWF, current, and investment expenditures that are consistent with the objectives of sustainability and higher investment scale can be measured. Comparison of the results of simulations of the model show that a smooth public investment path and saving in SWF combined with central bank sterilization of the money base, due to increases in the net foreign assets, not only contributes to sustainability of investment and reduced real exchange rate volatility, but also helps the monetary authority to pursue its objectives. |
| first_indexed | 2024-03-08T17:44:23Z |
| format | Article |
| id | doaj.art-ef784160b75840959246ea0bead23392 |
| institution | Directory Open Access Journal |
| issn | 2423-5954 2476-6437 |
| language | fas |
| last_indexed | 2024-03-08T17:44:23Z |
| publishDate | 2018-09-01 |
| publisher | Allameh Tabataba'i University Press |
| record_format | Article |
| series | Pizhūhishnāmah-i Iqtiṣād-i Inirzhī-i Īrān |
| spelling | doaj.art-ef784160b75840959246ea0bead233922024-01-02T10:48:36ZfasAllameh Tabataba'i University PressPizhūhishnāmah-i Iqtiṣād-i Inirzhī-i Īrān2423-59542476-64372018-09-0172814910.22054/jiee.2018.98379837Sustainability of Public Investment Approach for Management of Oil Revenues: The Case of IRANarash fakhrizadeh0Hossein Tavakolian1Seyyed Ahmad Reza Jalali Naini2economics, Phd student, Institute for management and planning studies, Tehran, IranAssistant Professor, Allameh Tabataba'i UniversityProfessor, Faculty of Economics, Institution for management and planning studies, Tehran, IranThe present article adopts the new approach to fiscal policy in the commodity (oil) exporting developing countries to avoid the "Dutch Disease" phenomenon and instead guide the economy toward "Dutch Vigor" through “sustainability and scaling up of public investment”. This approach results in greater stability of the real exchange rate and economic growth. We cast this issue in the context of a multi-sector dynamic stochastic general equilibrium (DSGE) for the Iranian economy. Three fiscal rules are used to allocate oil revenues for saving, current government expenditures, and government investments. The allocation process is done in two stages. First, the share of oil revenues to a sovereign wealth fund (SWF) is determined. Second, the remainder is allocated between current and investment expenditures. We look for a smooth public investment path. By estimating the structural parameters of the model, the share of SWF, current, and investment expenditures that are consistent with the objectives of sustainability and higher investment scale can be measured. Comparison of the results of simulations of the model show that a smooth public investment path and saving in SWF combined with central bank sterilization of the money base, due to increases in the net foreign assets, not only contributes to sustainability of investment and reduced real exchange rate volatility, but also helps the monetary authority to pursue its objectives.https://jiee.atu.ac.ir/article_9837_6cf231a6a68ba76bad239cafb530e166.pdfoil revenuespublic investmentfiscal rulessustainable |
| spellingShingle | arash fakhrizadeh Hossein Tavakolian Seyyed Ahmad Reza Jalali Naini Sustainability of Public Investment Approach for Management of Oil Revenues: The Case of IRAN Pizhūhishnāmah-i Iqtiṣād-i Inirzhī-i Īrān oil revenues public investment fiscal rules sustainable |
| title | Sustainability of Public Investment Approach for Management of Oil Revenues: The Case of IRAN |
| title_full | Sustainability of Public Investment Approach for Management of Oil Revenues: The Case of IRAN |
| title_fullStr | Sustainability of Public Investment Approach for Management of Oil Revenues: The Case of IRAN |
| title_full_unstemmed | Sustainability of Public Investment Approach for Management of Oil Revenues: The Case of IRAN |
| title_short | Sustainability of Public Investment Approach for Management of Oil Revenues: The Case of IRAN |
| title_sort | sustainability of public investment approach for management of oil revenues the case of iran |
| topic | oil revenues public investment fiscal rules sustainable |
| url | https://jiee.atu.ac.ir/article_9837_6cf231a6a68ba76bad239cafb530e166.pdf |
| work_keys_str_mv | AT arashfakhrizadeh sustainabilityofpublicinvestmentapproachformanagementofoilrevenuesthecaseofiran AT hosseintavakolian sustainabilityofpublicinvestmentapproachformanagementofoilrevenuesthecaseofiran AT seyyedahmadrezajalalinaini sustainabilityofpublicinvestmentapproachformanagementofoilrevenuesthecaseofiran |