The impact of oil price shocks of OPEC countries' national security on Iran's economy

Oil price wild fluctuations impact the economies of developing countries as well as those of developed ones, and in particular the economy of Iran. Focusing on OPEC’s national security as a proxy for precautionary demand, this study aims to disentangle oil price factors using an SVAR approach for 1994Q1 to 2016Q4 and then using its result to examine how different oil shocks impact OPEC’s economies differently. We disentangled oil price shocks into political risks, supplies, global demand for industrial goods and other oil price shocks. Our results highlight that shocks originated from different sources affect oil prices differently in terms of both their lifetime and directions. Besides, it is revealed that even though OPEC’s economies can take advantage of OPEC’s national security shocks to increase their national incomes, the economy of Iran is affected adversely by these shocks except for the situations in which the raise of national security tensions is not from Iran’s sanctions side.