The Role of the Exchange Reserve Account in the Stability of Government’s Revenues in Iran (Using a CGE Model)

Plentifulness of oil resources on the one hand, and serious economic challenges in the course of development of the country, on the other hand, makes the optimum use of these resources a considerable issue in achieving the goals of sustainable development.
Iran’s experience in establishing Exchange Reserve Account (ERA) during 2000-2005 indicates that its main function is saving the surplus revenues from oil and as soon as some funds has been accumulated, measures are taken to spend them.
At the same time, continous changes in the laws and regulations to facilitate the use of funds, prevented the effective role for the account.
This paper uses a computable general equilibrium (CGE). Model to examine the impact of economic shocks and government policies on economics. The proposed model is composed of three sections: tradable goods, non-tradable goods and oil-section, which has used three different scenarios to show the effects of oil revenues: Basic, ERA1 and ERA2. The results from the dynamic solution of the model indicates that in the case of temporary shocks of oil prices, the ERA2 leads to the reduction of instability of the government revenues more successfully than the ERA1.
JEL Classification: E62, H27, Q32, C68