Output Multiplier of Iran's Economic Sectors: Input-Output Analysis and Network Theory Approach

The structure of production networks determines the macroeconomic responses to sectorial shocks. Accordingly, key sectors are instrumental in transmitting supply and demand-side shocks. This article applies the methodology proposed by Savoie (2017) and network theory and implements the input-output tables of the Central Bank of Iran in 1988, 1993, 1999, 2004, 2010, and 2016 to examine the output multipliers of Iran's economic sectors. This article also compares the results based on Savoie's (2017) method with the driven results according to Friedkin's (1991) and Monize et al.'s (2008) methodology. The latter identifies key sectors using three centrality measures: total effect, immediate effect, and mediate effect. The results show that the "industry", "water, electricity, gas", and the "transportation and inventory" sectors have always had the highest connections with other sectors, and also have had the highest output multiplier. Besides, the "industry" and the "ICT" sectors are detected as the key and the developing sectors in Iran's economy, respectively. In addition, based on Friedkin's (1991) and Monize et al.'s (2008) methodology, the "construction" and "other services" sectors can foster Iran's economic growth; even though based on Savoie's (2017) methodology, these sectors relatively had a lower output multiplier.