Dynamic relationship between oil shocks and country risk index in Iran

In recent years, country risk index has been considered one of the most important economic indicators that it’s relationship with other macroeconomic variables attention by economist and researcher. Therefore, the main question of this paper is that there is a relationship between oil shocks (supply-side, aggregate demand, oil specific demand) and country risk in Iran?. Hence in this paper, we used the monthly time data series from 2002:1 to 2015:12 with the framework of the Structural Vector Autoregressive (SVAR) model. The results of the study indicate that oil supply shocks don't have a significant effect on the country's risk index in Iran but, oil specific demand shocks and aggregate demand shocks have significant effects on the country risk in Iran. So that, the most impact of Iran's country risk index among the three shocks belongs to the crude oil specific demand shocks. Furthermore, the results demonstrate that response of supply and crude oil specific demand has been negative to changes of country risk in Iran and the response of oil aggregate demand is positive to the changes of Iran's country risk that these relationships aren't statistically significant.