The Effect of Energy Subsidies Elimination on GNP in IRAN
Subject Areas : Applied Economics
تیمور محمدی
1
(مسئول مکاتبات)
جمشید پژویان
2
(ندارد)
شیما عباس زاده
3
(ندارد)
Keywords: GDP Growth, VAR Econometrics Model, Petroleum Consumption Subsidie,
Abstract :
Up to now energy consumption in Iran due to having cheap sources of energy and support from government subsidies in comparison with the international standards has been high. Determining energy prices lower than the world price by the government increases government spending and as a result increases unsustainable budget deficit. Undoubtedly removing energy subsidies for optimal allocation of limited resources is the most important task that should be done in the Iranian economy. The aim of this study is to investigate the effects of removing energy subsidies on macroeconomic variables such as economic growth and energy consumption of petroleum products such as gasoline and gas oil using VAR econometrics model.For achieving this goal, three hypotheses have been investigated. The first hypothesis indicated that “the subsidies are the Granger cause of GNP growth”. The second hypothesis is “removing subsidies decreases the production” and the last hypothesis is “the effect of removing subsidies takes more than two time period”. Statistical database is the Iranian economy between years 1356 to 1387 when the subsidies were paid. Investigated variables in this study are real price of gasoline, real price of gas oil, real annual gasoline consumption, real annual gas oil consumption, GNP and a dummy variable.Results of this study indicate that if the prices of gasoline and gas oil reduce the consumption of these two products, GDP growth will decrease but if the consumption of these two products does not change considerably, it would not affect GDP growth.
