Investigating the Asymmetric Effects of Oil Revenues and Government Facilities on Iran's Agricultural Economy Using the NARDL Nonlinear Model

Document Type : Research Paper

Author

• Marjan Damankeshideh

Department of Economics , Central Tehran Branch , Islamic Azad University , Tehran , Iran.

10.30495/jae.2021.23771.2116

Abstract

Introduction: Since the agriculture industry brings the minimum exchange earnings and produces alternative products, it serves as the most substantial way to grow and develop in non-oil products export. In this way, the agriculture industry reduces oil dependence. According to economic theories, a high-volume capital in a country can provide the field for higher economic growth, development, and production. Nevertheless, Iran has not been a success story in using its oil resources to achieve growth and development. Dependent on the Iranian economy on oil can be mentioned as one of the main reasons for the failure.
Materials and Methods: The extant paper aims to find whether oil is a curse for Iran's economy since higher oil revenues in Iran harm the economy, particularly the agriculture sector. On the other hand, this study was conducted to find the impact rate of oil revenues on economic efficiency, especially in the agriculture sector. In this research, the direction of the mentioned effect was examined by using a nonlinear NRDL model for the period 1981-2018. The estimated relations indicated the positive
 Findings: impact of asymmetric effects of positive oil revenues, government facilities given by banks to the agriculture sector, asymmetric effects of the positive exchange rate, capital, and labor, as well as the negative association between asymmetric effects of negative oil revenues, inflation, asymmetric effects of negative exchange rate, agriculture growth rate on Iran' economy. According to the obtained results, the capital volume of the agriculture sector (76/0) and positive oil revenues (59/0) had the highest effect on the growth rate of agriculture within the long-term period.
Conclusion: However, it must be mentioned that the agriculture sector and macroeconomics depend on oil revenues in Iran. In other words, an increase in oil revenues will lead to a rise in government earnings because of the severe dependence of Iran's economy on oil revenues. However, the increased oil revenues have not been managed well in Iran, but they have been spent on short-run expenditures causing inflation and lower growth of the agriculture sector. Therefore, economic growth of the agriculture sector will be provided by creating an economic security and safe environment for investment, expanding and diversifying fiscal markets and institutes, moving towards the open economy, using foreign investment, changing capital market rules, creating transparency and stability, and increasing saving and investment.

Keywords

• Oil revenues
• Agricultural economy
• Concessional facilities
• Gross agricultural capital
• and Boundary test approach

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