Analyzing the Effects of Energy Price Liberalization on the Main Macroeconomic Variables of Iran, Within a Structural Macroeconometric Model Framework



A medium scale structural macroeconometric model is constructed to investigate the effects of energy price liberalization on the main macroeconomic variables. The analysis is conducted under 3 different scenarios of increasing the price of energy sources to the level prevailed in the countries of the Persian Gulf region. These 3 scenarios are a sudden increase, a gradual increase within a 5 years time span and a gradual increase in energy prices together with some compensation of household and the industry.
The simulation results show that under the first scenario, inflation rate goes up to 94%, GDP growth rate reduces to 1.2% and unemployment rate rises to 11.5%. Under the second scenario , in the first year of rising energy prices, inflation rate increase to 27.7% and GDP growth rates falls to 2%. If the third scenario is chosen, the inflation rate will increase to 95.2% in the first year, while GDP growth rate and unemployment rate will be 1.2% and 11.5% respectively.
JEL Classification: H25, O47 E24,E23, E31, E37