The Effect of Correcting The Fuel Price Gap on Economic Growth in Iran and Selected Contries

Document Type : Original Article

Authors

1 Econamic

2 Economic

3 assistant Professor of Economics, Islamic Azad university, Central Tehran Branch

Abstract

The Effect of Correcting The Fuel Price Gap on Economic Growth in Iran and Selected Contries

Abstract

The purpose of this study is to investigate the effects of fossil fuel subsidy reform on economic growth in Iran and several other countries. For this purpose, an endogenous growth model was specified and estimated using OLS Robust and Panel GMM methods, based on annual data in the surveyed countries in the period 2000-2018. The OLS Robust model, which analyzes the long-term effects, has been developed for the diesel product in three time periods: 2000-2018, 2000-2004, and 2005-2018. The results show that the fuel price gap variable increases in the mentioned three periods per unit of reduction in fuel subsidies by 5.53, 10.69 and 5.12 units of economic growth, respectively. In the GMM Panel model, which analyzes the short-term and medium-term effects, during the period 2000-2018, a one-unit increase in the price of diesel will increase economic growth by an average of 8.84 units.

e results show that the fuel price gap variable increases in the mentioned three periods per unit of reduction in fuel subsidies by 5.53, 10.69 and 5.12 units of economic growth, respectively. In the GMM Panel model, which analyzes the short-term and medium-term effects, during the period 2000-2018, a one-unit increase in the price of diesel will increase economic growth by an average of 8.84 units.The Effect of Correcting The Fuel Price Gap on Economic Growth in Iran and Selected Contries

Abstract

The purpose of this study is to investigate the effects of fossil fuel subsidy reform on economic growth in Iran and several other countries. For this purpose, an endogenous growth model was specified and estimated using OLS Robust and Panel GMM methods, based on annual data in the surveyed countries in the period 2000-2018. The OLS Robust model, which analyzes the long-term effects, has been developed for the diesel product in three time periods: 2000

Keywords

Main Subjects

References

Arshad, A., Zakaria, M., & Junyang, X. (2016). Energy prices and economic growth in Pakistan: A macro-econometric analysis. Renewable and Sustainable Energy Reviews, 55, 25-33.‏ https://doi.org/10.1016/j.rser.2015.10.051
Amadeh, H., ghazi, M., & Abbasifar, Z. (2010). Causality Relation between Energy Consumption and Economic Growth and Employment in Iranian Economy. Journal of Economic Research (Tahghighat- E- Eghtesadi), 44(1), 97-111. Doi 20.1001.1.00398969.1388.44.1.1.5 [in Persion].
Commander, S. (2012). A guide to the political economy of reforming energy subsidies (No. 52). IZA Policy paper. http://hdl.handle.net/10419/91797
Dargahi, H., & Ghorbannejad, M. (2012). The Impacts of Energy Prices Reform and the Compensation Policies on Macroeconomics Variables: The Case of Iran (2011-2015). Iranian Energy Economics, 1(4), 67-100. [in Persion].
Farhang, A. A. (2022). The effects of fossil fuels consumption, CO2 emissions and crude oil prices on economic growth. Economic Growth and Development Research, 12(48), 97-110. https://doi.org/10.30473/egdr.2022.61155.6334 [in Persion].
Fetini, H. Bacon, R. (1999), " Economic aspects of increasing energy prices to border price levels in the Islamic Republic of Iran. The World Bank. Middle East and Africa Region. http://hdl.handle.net/10419/91797
Hope, E. Singh, B. (1995), Energy Price increases in developing countries. world chbank policy Research Working Paper No. 1442.
Huntington, H., & Liddle, B. (2022). How energy prices shape OECD economic growth: Panel evidence from multiple decades. Energy Economics, 111, 106082. https://doi.org/10.1016/j.eneco.2022.106082
Kırca, M., Canbay, Ş., & Pirali, K. (2020). Is the relationship between oil-gas prices index and economic growth in Turkey permanent?. Resources Policy, 69, 101838. https://doi.org/10.1016/j.resourpol.2020.101838
Lin, B., & Jiang, Z. (2011). Estimates of energy subsidies in China and impact of energy subsidy reform. Energy Economics, 33(2), 273-283.Lucas, R.E., 1988. On the mechanisms of economic development. J. Monet. Econ. 22(1), 3-42. https://doi.org/10.1016/j.eneco.2010.07.005
Moshiri, s. (2015), The effects of the energy price reform on households consumption in Iran. Energy Policy, 79, 177-188. https://doi.org/10.1016/j.enpol.2015.01.012
Nazrai, J,. (2018). Investigating the effect of oil price on Iran's economic growth in different oil price regimes: Markov transition freedom, Master's thesis, Faculty of Economics, Allameh Tabatabai University. ‎ doi 20.1001.1.22286454.1397.9.34.5.1 [in Persion].
 
Ostadi, H. (2016). Important Factors of Iran Economic Growth by Considering the Effects of Increased Energy Prices. Economic Growth and Development Research, 6(24), 133-144.  doi20.1001.1.22285954.1395.6.24.8.7 [in Persion].
Romer, P. M., 1986. Increasing returns and long run growth. J. Political Econ. 94, 1002-1037.
Salehi-Isfahani, D., & Majbouri, M. (2013). Mobility and the dynamics of poverty in Iran: Evidence from the 1992–1995 panel survey. The quarterly review of economics and finance, 53(3), 257-267. https://doi.org/10.1016/j.qref.2010.04.001
Sharmin, F., & Khan, M. R. (2016). A causal relationship between energy consumption, energy prices and economic growth in Africa. International Journal of Energy Economics and Policy, 6(3), 477-494
Strand, J. (2016). Model of non-corrupt government versus corrupt government in delivery of transport services: The impact of energy subsidies. The Economics and Political Economy of Energy Subsides. Cambridge, MA, 93-114.
Wang, Q., Su, M., Li, R., & Ponce, P. (2019). The effects of energy prices, urbanization and economic growth on energy consumption per capita in 186 countries. Journal of cleaner production, 225, 1017-1032. https://doi.org/10.1016/j.jclepro.2019.04.008
Public Sector Economics Studies
Volume 2, Issue 4
February 2024
Pages 409-426

Files

History

  • Receive Date: 26 November 2023
  • Revise Date: 05 February 2024
  • Accept Date: 05 February 2024

Share

How to cite

Statistics