Modeling the Oil-Revenue Shocks in Iran, in the Context of a Neoclassical Framework

The oil-export revenues can impact the components of monetary aggregates; through the Iranian government budget; resulting in the loose of the Iranian central bank's control over the money and inflation. The empirical evidences show that the positive and the negative oil-export revenue shocks increase the inflation rate in Iran. This paper intends to build a Neoclassical Dynamic Stochastic Model to analyze the channels through which the oil-export revenues impact the Iranian economy and inflation rate; on the basis of the assumption that the monetary, fiscal and development policy measures are highly inter-related.