The Impact of Oil Resource Abundance on Iran's Economic Growth Through The Impact on The Budget and External Sector Imbalances

This paper examines the effect of oil resource abundance on economic growth through the budget and external sector Imbalances. The three equations -that have been extracted from theoretical explanation-estimated simultaneously, using 3SLS for the period 1973-2012. We find negative effects of non-oil budget deficit and non-oil trade deficit on economic growth. According to the estimations, budget deficit has caused the trade deficit, but the reverse is not true. So, it can be said twin deficit hypothesis is not confirmed. The effect of oil revenues and real exchange rate on non-oil trade deficit is negative and significant. Government spending has a positive effect on the budget deficit that is consistent with theoretical expectations. The impact of oil revenues on the non-oil trade deficit is positive and significant. In general, it can be said that although the impact of oil revenues on economic growth is positive, these incomes decrease economic growth through the exacerbate imbalances such as budget deficits and trade deficits.