Document Type : ORIGINAL ARTICLE

Author

• Abbas memarzadeh

Vali-e-asr university

Abstract

In this study, by considering the asymmetric response of the aggregate and sector-level value-added to the positive and negative oil rent shocks, a new insight into the oil curse hypothesis is provided for the case of Iran. Using annual data from 1988 to 2022 and an NARDL model, the findings indicate the aggregate growth shows asymmetric reaction to positive and negative oil rent shocks just in the long run. Although this asymmetry is also confirmed for sector-level growth, the instinct of that varies significantly among them. Our analysis supports the oil curse hypothesis in Iran, and this curse channels via Dutch Disease mechanism in the manufacturing sector. So, even though diversification remains a key policy agenda to decrease the level of oil rent dependence, policymakers should consider the harmful impact of oil rent decrease on the growth of certain economic sectors. Therefore, the effectiveness of any diversification policy mainly depends on whether policy makers have a full understanding of the heterogeneous response of economic sectors to crude oil rent shocks.

Keywords

• oil curse
• oil shocks
• Dutch disease
• Nonlinear
• Asymmetric

Main Subjects

• s