(major – trend)
Economics-Economics
Bahman 1391
Abstract
Revenues from the sale of oil have a significant share in the government's income and the government's gross domestic product in Iran. On the one hand, due to the importance of the industry sector in economic growth, undoubtedly, facing increases and decreases in oil revenues will have effects on various economic sectors, including the industry sector as a key sector in the economy. Therefore, knowing the manner and severity of the economic impact of these increases and decreases in oil revenues on the growth of economic sectors, including industry, in Iran as an important oil exporting country is of special importance for economic policies. Accordingly, in this study, using the self-explanatory vector VAR model and the reverse function of Anio, the results of the analysis are analyzed. Variance has investigated the effect of instability in oil revenues on the growth of the industrial sector during the period of 1358-1388. The results obtained from this study indicate that the creation of a positive impulse in oil revenues, i.e., an increase in oil revenues in the short term, has a very small positive effect on industrial production and the growth of the industrial sector, but over time and in the long term, this positive effect on the growth of the industrial sector becomes less and less and gradually causes a decrease in the growth of the industrial sector and industrial exports. Also, the results of the analysis of variance show the existence of an effective relationship between the growth of the industry sector and the momentum of oil revenues.
Key words: oil revenues, exchange rate, growth of the industry sector, self-explanatory vector model, instantaneous function, results of variance analysis.
Chapter 1
1 Introduction
There is no doubt that fluctuations in oil exports and as a result oil revenues are one of the important factors in the lack of stable stability in the economy of oil producing and exporting countries. Since the majority of Iran's exports are primary products such as crude oil and raw materials, and on the other hand, the smallness and dependence of Iran's economy on the export earnings of such materials causes, in the event of unexpected and short-term increases in the export earnings of such products, including oil, all economic sectors, including the industrial sector, will be affected, and the competitiveness of the tradable sector (industry) will be affected. be reduced by increasing the exchange rate, which will lead to a reduction in the growth of tradable sectors, including the industrial sector (Ebrahimi et al., 2017). Like many primary commodities, the price elasticity of demand for oil is low, and a slight shift in supply and demand leads to drastic changes in the price and, as a result, the income of the exporting countries. In some oil-exporting countries, oil revenues are considered the first and most important source of government income (Dan[1], 2001). In fact, oil exports in oil-rich countries such as Iran have a significant contribution to the overall state of the economy and its sub-sectors, including industry. On the one hand, these revenues provide a major share of the country's foreign exchange needs, and on the other hand, it is the main supplier of the government's expenses. Basically, in such countries, development planning has a strong need for such revenues, and the advancement of the goals set in the direction of the country's development is based on the existence of these revenue sources (Zind [2], 1999).
The non-realization of the previously predicted revenues can close part of the development programs and deprive the country of achieving the growth rates set in different sectors. In such a situation, instability and as a result, fluctuations in oil exports have a negative relationship with the overall economic growth and as a result the growth of various sectors, including the industrial sector. An increase in oil revenues beyond the predicted values ??may also have different results. The surplus of the generated incomes should lead to the increase of the country's economy and be allocated to projects and programs that lead to the further development of the country, and on the other hand, it may trap the country in the trap of high-flying programs and cause economic imbalances such as budget deficits, balance of payments imbalances, and trade deficits.The surplus of the generated incomes should lead to the increase of the country's economic power and be allocated to projects and programs that lead to further development of the country, and on the other hand, it may trap the country in the trap of ambitious plans and cause economic imbalances such as budget deficits, balance of payments imbalances, foreign trade deficits and even savings capital gaps (Piri et al., 2007 and Farzangan and Marquardt[3], 2007).
According to the theories of international trade, developing countries have benefited from primary economic expertise due to their relative advantage and abundance of production inputs, and the abundance of inputs in these countries has justified the entry of foreign investments. Meanwhile, some economists criticize the development of international specialization due to the heavy dependence of the economy on raw export goods. This group believes that the international specialization of goods for a country has led to a strong dependence of that country's economy on export earnings, and due to the unpredictability and exogenousness of the price of raw export goods and their extreme price fluctuations, export earnings are also subject to instability, which will have a negative effect on the entire economy (Abbasian et al., 2016).
Oil sector in most exporting countries. It is government owned and oil revenues belong to the government. Due to the high share of oil revenues in the budget and gross domestic product of these countries, oil impulses increase the real value of the domestic currency of these countries, followed by the contraction of the production of tradable goods [4] (especially export goods). and the expansion of the production sector of non-tradable goods [5]. Empirical studies also show that foreign exchange earnings from the boom in the export of oil or any other raw material have left severe negative effects in many countries in the long term (Delevin and Levin [6], 2004). In the economic literature, this phenomenon is known as the Dutch disease[7]. Dutch disease causes unequal growth of economic sectors. This unbalanced growth is in favor of the service sector (or non-tradable) and to the detriment of the industry and agriculture (or tradable) sectors, and it weakens the economic power of the country exporting primary goods (Farzangan and Marquardt, 2007).
Therefore, one of the characteristics of oil economies is the presence of Dutch disease in these economies. According to the Dutch disease, if the economy faces a sudden increase in the export price of primary goods such as crude oil, this will lead to an increase in income and then an increase in domestic demand. The main reaction of the economy against this impulse is the increase in the demand for labor, followed by an increase in wages. Due to the fact that the price of products in the exogenous sector is assumed, only the price of products in the non-tradable sector increases, therefore, the increase in wages reduces the profits of the export sectors, and finally, the impact of the sudden impulse in the price of oil leads to a decrease in the value of the domestic currency and an increase in the real exchange rate (Ismail [8], 2005, Bruno and Sachs [9], 1982). In fact Oil shocks can act as a double-edged sword for oil-exporting countries, as oil prices and oil revenues increase, a country's foreign exchange earnings increase. In this case, the national income and economic growth of that country will increase and it will raise the standard of living of the people, but on the other hand, it can disturb the balanced growth of the economic sectors. This means that the non-tradable part of the country (the part whose products are not exposed to international competition) expands and the tradable part weakens (Mehrara and Miri 2013). Therefore, according to the topics presented, the increase in oil revenues from the exchange rate channel and the increase in foreign exchange revenues can reduce the growth of the industry sector as a tradable part in the economy of exporting countries. and become dependent on oil revenues, which can impose many negative effects on the economic structure of these countries. Therefore, considering the position of oil and oil revenues in the Iranian economy and the impact of the increase in oil revenues through the Dutch disease phenomenon on the growth of the economic sectors of oil exporting countries, including the industry sector, this study will examine the extent of the impact of the increase in oil revenues on the growth of the industry sector in Iran.
1-3 Importance of the topic
Oil is the most key and at the same time the most political commodity in today's world, and therefore the oil policy of oil-rich countries actually constitutes a major part of the national policy of these countries.