Study of global geopolitical risks in the policies and economic management of the Islamic Republic of Iran

In this paper, we examine the global geopolitical shocks and dangers (the United States of America) and play an important role in economic policies and economic management in the Islamic Republic of Iran. We estimated the variance of structural models for the country. The results indicate that political geopolitical shocks explain the unparalleled contribution of the variety of production to the system of the Islamic Republic of Iran. The average share of outbound movements due to global geopolitical shocks is between 13% and 22%. However, the blunt responses to geopolitical shocks vary widely in the Islamic Republic of Iran. The preliminary results show that unexpected increase in geopolitical risks reduces actual production, consumption and investment. In particular, the peak consumption and investment rates are 0.8% and 2.2%, respectively. The real exchange rate is down by more than two percent (the improvement in trade balance is about 0.4%). Generally, the average output is reduced by about one percent. The result of the increased risk of geopolitics has led to a real decline in the exchange rate, and suggests that emerging economies are investing after a geopolitical risk. The trade balance improves when the real exchange rate falls, but recovery is not large enough to determine the impact on consumption and investment.