Asymmetric Effects of Oil Shocks on Business Cycles in Iran's Economy

The importance of oil revenue in Iran's economy and its effect on business cycles is an undeniable issue. Oil revenue is a critical factor in Iran's economy and affects GDP to a great extent. Oil and Gas sector is not only an influential economic activity per se, but also an important source of financing other sectors in Iran's economy. In this paper, we try to examine asymmetrical effects of oil shocks on business cycles. Whether an equal increase and decrease in oil revenues have neutral effect on business cycles, is the main question to be addressed here. To undertake this research, annual data of 1959-2007 time periods has been used. The findings display that the business cycles response to oil shocks is asymmetric, meaning that negative shocks dominate positive shocks.