Asymmetric Impacts of Oil Price Shocks on Iranian Economic Growth

Abstract

The study examines asymmetrical effects of ups and downs in oil price on Iran's economic growth from 1990 to 2022, which also includes unemployment and inflation as major macroeconomic factors. The nonlinear autoregressive distributed lag (NARDL) model was employed to examine the effects of positive and negative shocks of oil price on the economic growth. Conclusions make a contribution to the literature on the economic implications of oil price fluctuations, especially in oil -dependent economies such as Iran. The results of the unit root tests indicate that variables are integrated of different orders, which justify the use of the NARDL approach. Structural break tests highlight significant economic changes in the period analyzed in Iran, especially for oil prices in 2012 and 2017, for unemployment for 1994 and 1998, and for inflation in 2012 and 2002. Furthermore, the findings confirm the presence of long -term relationship between oil price fluctuations and economic growth. The results for short -term estimation suggest that a positive oil price shock adversely affects economic growth, while the negative oil price shock has an insignificant effect. Unemployment plays an important role, with positive shock in unemployment showing a strong negative effect on economic growth. Inflation pressure, both positively and negatively, has a small effect. Long -lasting results confirm the asymmetrical effects of oil price movements, a shock of positive oil price adversely affects the GDP growth, while negative oil price shows an insignificant effect.