The Shock Effect of Oil Revenues on the Export of Iran Saffron

Abstract

Oil revenues play a major role in Iran's economy. In recent years, an average of about 60% of government revenues and 80% of Iran's export income have been from oil and gas. On the other hand, Iran as largest exporter of saffron has a significant part of the value of global exports of the product. Considering that oil revenues over the past years has been Iran's main source of income, it seems essential to investigate the shock impact of oil revenues on the export of the product. The present study examined the effect of shock of oil revenues on the export of saffron in Iran. In this regard, the data time series for 1974- 2016 and Johansen Juselius and error correction model for Long-term and short-term relationships between the variables model were used. The results show that the real effective exchange rates in the long-term and short-term have a significant positive effect on the export of saffron in the country. Although index of ratio of domestic to world prices of saffron and saffron productivity were not statistically significant, their effect has positive and negative sign, respectively. Shock of oil revenues in the short term and the long term have a negative effect on the export of saffron as expected.

Keywords

• Error Correction Model
• oil revenues
• Shock
• Saffron