Crude oil price contagion to the growth of Industry and Mine sector in Iran: An approach to Markov-Switching Models

This paper investigates factors of contagion between crude oil price and growth of Industry and Mine sector in Iran during 1367:1- 1389:4. For this reason، the dynamic correlation between crude oil price and growth of Industry and Mine sector has been analyzed by means of the DCC Model. Then، in order to explain the changes in dynamic correlation between oil price and Industry and Mine sector growth، we estimated MSIXH (2) -ARX (0،0) model. Our results show that crude oil price have a positive impact on Industry and Mine sector growth، which is explained by real import، real government consumption expenditure، Inflation، real effective exchange rate and oil price that can be controled. These results suggest that in order to increase Industry and Mine sector growth، increasing import of intermediate goods along with structural policies for increasing the compatitiveness of domestic products and non-oil export promotion policies، reduction in government consumption expenditure and implementing policies to stabilize the general price level and government consumption expenditure against changes in oil prices is necessary.