The Impact of Targeting SubsidiesofEnergyCarriersonInflationandEconomic Growthin Iran

In this study, the effect of elimination of Subsidy of energy carrierson two variables of economic growth and inflation in Iran is evaluated to help a macro econometric model. In this regardusing time series data for 1976-2007 and Auto-Regressive Distributed Lag model (ARDL), equations and the sectors of economic relations within the three markets of goods and services, labor market and money market were estimated. Establishing classic properties of errors perused for all equations and also to ensure long-term equilibrium relationship between variables, Banerjee test was for all equations. By assistance of dynamic simulation in the form of a macroeconomic model, the estimated equations was solved simultaneously. Considering the direction of simulated values and actual values of variables and quantitative statistical used to measure the validity of the model, the results of simulations were satisfactory. Furthermore in order to predict endogenous variables of model for the period of 2008-2012, exogenous variables of mention period were predicted using time series model (ARIMA). Based on forecast, economic growth rate for years 2008 and 2009 were obtained 2.34 and 1.04 percent respectively, according to the latest report of the Central Bank of Iran's economic developments in the real sector in the first half of 2008 and the International money fund (IMF) report, results are not very far from reality. As then, the impacts of prices increase of energy carriers (the way was announced in the late November 2010) on two variables of economic growth and an inflation rate are predicted under different scenarios for the years 2010 to 2012. According to different scenarios, implementation of the plan will have positive impact on economic growth and negative effect on inflation. The results also show that if the plan for reforming energy carriesr prices is accompanied by improvement of productivity, itwill leave positive effects on economy.