• Energy Research

Abstract Iran is among the top ten CO2 emitters in the world and has pledged to reduce such emissions by up to 12 percent by 2030 through various policies and strategies. However, achieving this is somewhat undermined by the country’s heavy reliance on fossil fuels which contributes to environmental pollution and depletion of natural resources. It is therefore important to have an understanding of the economic, social, and environmental subsystems and their interactions in order to formulate a suitable development path or model. Due to the lack of comprehensive studies on the current situation and the dynamics among these variables, this paper provides a multi-stage analysis of the issues based on data from 1992 to 2015 to construct the principal component analysis (PCA) combined index for each subsystem. Then, the interactions among the subsystems are investigated over the short- and long-terms using the vector autoregressive (VAR) model. The results of the PCA show that Iran lacks a balanced sustainable development approach as improvements in environmental indicators do not match those of the society and the economy indices. Further, the associated time path for the economic and societal indices depicts an increasing trend over time, especially in the economy index and that, since 2010, this subsystem has overtaken the societal index. Estimations of the VAR model, impulse response functions, and variance decomposition analysis show that the country’s economic development has seriously undermined the environment even as improving the social indices has strengthened the environmental indicators. The interactions among subsystems show that economic development of the country took little consideration of environmental issues. This is the main reason for the backwardness of the environmental indices and its divergence from economic and societal indices. It is clear that assuming equal rates of growth for all subsystems have not produced a balanced development path. For Iran to achieve her sustainable development goals there should be increased focus on the environmental subsystem with the overall system converging symmetrically when the high growth rate assumption (double) is applied for this index compared with the societal and economical indices.

Abstract Macroeconomic performances are extremely affected by unexpected oil price shocks in oil-exporting countries. Monetary rules rarely work properly in this environment. Therefore, determining the appropriate rules to reduce macroeconomic volatilities is essential. This study mainly aims to evaluate the oil price shock on macroeconomic variables through the lens of the new Keynesian dynamic stochastic general equilibrium (NK-DSGE) model for oil-exporting economies. The proposed model contains various components including households, firms, the central bank, government, external, and oil sectors as well as some real and nominal frictions and calibrates for an oil-exporting economy, Iran. We have designed an account called a consolidated account by aggregating the government budget, the balance of payments account, and entering the foreign currency. Three novel scenarios have also been developed by combining various rules including exchange rate regimes, inflation targeting, and the oil export revenues in our study. The findings imply that oil price shocks coupled with the rise in oil revenues result in a broadening of the monetary base, and eventually leads to liquidity growth and higher inflation rates. Moreover, such an oil price shock leads to a depreciation in the real exchange rate and a decline in economic competitiveness in all scenarios. Therefore, monetary rules-regardless of the exchange rate regime would lead to a lack of competitiveness with varying degrees of intensity. Our findings suggest that the sovereign wealth funds (SWFs) could be utilized to cushion the economy from external oil price shocks in oil-exporting countries.