Effect of Permanent and Transitory Volatility of Oil Prices on Investment, Output and Unemployment in the Economy of Iran

This study investigates the impact of oil price volatility on macroeconomic variables such as investment, unemployment and production based on quarterly data during the period 1386:4-1369:1. To achieve this, permanent and transitory volatility of OPEC oil price estimated by component GARCH model (CGARCH). Then, using the Impulse response function, the impact of permanent and transitory volatility of oil prices on macroeconomic variables has been analyzed. The results indicate that permanent uncertainty arising from changes in oil prices has led to decline investment and production and to rise unemployment. And the impact on these variables is permenant. It is indicated that investment and production has declined and unemployment has increased due to oil price uncertainty and this process is accompanied by a high volatility.