The Effect of Different Scenarios of the Share of Oil Revenues in the National Development Fund on the Production and Employment: the Case of Iran

Document Type : Research Paper


1 Ph.D. Candidate in Economics, University of Yazd,

2 Associate Professor of Economics, University of Yazd,

3 Associate Professor of Economics, University of Esfahan,


Many countries which their exports are mainly based on mineral resources are faced with the fluctuations in their foreign revenues. Based on this issue In Iran, in order to reduce the negative effects of oil shocks revenue on macroeconomic variables the National Development Fund was established as a tool to control such a fluctuations. In this study, using the Dynamic Stochastic General Equilibrium Model, three scenarios were developed to investigate the impact of the share of funds which will be allocated to the National Development Fund for controlling oil revenue fluctuations. In the first and second scenarios, according to the fifth and sixth development plans, the share of the fund was equal to 20% and 30%, respectively, and in the third scenario, the share of the fund was considered as floating share in models which have been applied. According to the research findings, the impulse function of oil revenues shocks in all three scenarios has increased the production and employment of the public sector and reduced the employment in the private sector. The results indicate that when oil shocks occur, the use of floating share of oil revenue for the National Development Fund in relative to the fixed share to allocate oil revenue sources to that fund, causes more fluctuations in production and employment variables in the public sector


Main Subjects

  1. Andersen, L. E., Faris, R. (2002). Reducing volatility due to Natural Gas exports: Is the answer a Stabilization Fund?(No.1101). Documento de Trabajo.
  2. Asik, G. A. (2013). Stabilization Funds in Oil-Rich Countries and Fiscal Policy:(A) cyclicality?. London School of Economics Job Market Paper, November, 27.
  3. Bastani, A., Razmi, M., Naji meydani, A., & Baki hoskoee, M. (2017). Optimal Allocation of Oil Revenues to the National Development Fund, Dynamic Optimization Analysis. Quarterly Journal of Energy Policy and Planning Research, 3(6), 135-169 (in Persian).
  4. Behbodi, D., Motofakerazad, M. A., Mohamadzadeh, P., & Sadeghi, K. (2012). National Development Fund or Direct Distribution of Oil Revenues (Comparative Study). Parliament and Strategic Quarterly, 19(71), 38-84 (in Persian).
  5. Burney, N. A., Mohaddes, K., Alawadhi, A., & Al-Musallam, M. (2018). The Dynamics and Determinants of Kuwait's Long-run Economic Growth. Economic Modelling, 71, 289-304.
  6. Ebrahimi, S. (2011), The Effect of Oil Price Shocks and Exchange Rate Fluctuations and the Resulting Uncertainty on the Economic Growth of Selected Oil Countries. Quarterly Journal of Business Research, 59, 83-105 (In Persian).
  7. Guerra-Salas, J. (2014). Government Investment and the Business Cycle in Oil-exporting Countries. Bronx: Fordham University.
  8. Hasanov, F., & Cherif, R. (2012). Oil Exporters’ Dilemma: How Much to Save and How Much to Invest.
  9. Holm, M. B. (2014). Oil, Sovereign Wealth Funds and Monetary Policy (Master's thesis).
  10. Hoshmand, M., Salimifar, M., Gorji, E., & Tavakoli ghochani, S. (2020). Investigating the Role of the National Development Fund in Facing Oil Shocks in the Iranian Economy through the Government Expenditure Channel Using a Stochastic Dynamic General Equilibrium Model. Iranian Journal of Applied Economic Studies, 9(33), 57-91 (In Persian).
  11. Motovaseli, M., Ebrahimi, E., Shahmoradi, A., & Komijani, A. (2010). Designing a New Keynesian Stochastic Dynamic General Equilibrium Model for Iran's Economy as an Oil Exporting Country. Quarterly Journal of Economic Research, 10(4), 87-116 (In Persian).
  12. Pedram, M., Shirinbakhsh, Sh., & Jamshidlo, R. (2018). The role of Different Scenarios of the National Development Fund on Production and Inflation Variables in Iran. Quarterly Journal of Energy Economics Studies, 14(59), 55-83 (in Persian).
  13. Razmi, M., Naji meydani, A., Karimzadeh, M., & Gheybi hashemabadi, A. (2017). Oil Shocks and Dynamics of the National Development Fund; New Keynesian Dynamic Stochastic General Equilibrium Approach. Quarterly Journal of Econometric Modeling, 2(3), 33-64 (in Persian).
  14. Sayadi, M., Danesh Jafari, D., Bahrami, J., & Rafei, M. (2015). Provide a Framework for the Optimal Use of Oil Revenues in Iran, a Dynamic Stochastic General Equilibrium Approach. Quarterly Journal of Planning and Budgeting, 20(2), 21-58 (In Persian).
  15. Seifi, A., Khodaparast Mashhadi, M., & Ghezelbash, A. (2015). Investigating the Scenario of Optimal Allocation of Oil Revenues in Iran, Assuming the Existence of Dutch disease With a Dynamic Computable General Equilibrium Approach. Scientific Journal of Economic Policy, 11(22), 335-364 (In Persian).
  16. Semko, R. (2013). Optimal Economic Policy and Oil Prices Shocks in Russia. Economic Research-Ekonomska Istraživanja, 26(2),69_82.
  17. Tavakoli, S., Hooshmand, M., Salimifar, M., Gorji, E. (2017). Investigating the Effect of Fiscal Policy As a Mechanism for Propagating Oil Shocks in the Iranian Economy Using a Structural Autoregression model. Quarterly Applied Economic Studies of Iran, 22, 77-98 (In Persian).
  18. Tavaklian, H., Mehrara, M., Hassanzadeh & Yousefabadi, M. (2017). The Role of the National Development Fund in Reducing Iran's economic Fluctuations, DSGE approach. Quarterly Journal of Financial Economics, 11(41), 1-41 (In Persian).
  19. Van der Ploeg, F. (2012). Bottlenecks in Ramping up Public Investment. International Tax and Public Finance, 19 (4), 509-538