Oil Revenue Shocks and Reallocation of Economic Activities in an Oil Exporting Country; The Case of Iran

The present paper investigates the impact of an oil shock on the Iranian macroeconomics activities from a general equilibrium perspective. We address a new evidence of the reallocation of oil resources between public and private sectors in an oil exporting country. Our finding indicates that while a positive oil shock expands the public sector (investment, capital stock, employment and production positively responded to the shock), the private sector has become smaller following a positive oil shock. In general, we find the strong signs of crowding out effects of public over private investment after expanding the public sector due to a positive oil revenue shock.