Evaluating the Impact of Economic Sanctions on the main Economic Sectors of Iran through the Application of a Macro-Econometric Model

Document Type : Original Article

Author

Associate Professor, Department of Modeling and regional studies group, Institute For Trade Studies and Research, Tehran, Iran.

Abstract

In the current climate, the imposition of sanctions as a tool for foreign policy is not only increasing in terms of frequency of incidence, but also in terms of scope, complexity and effects. The unpredictability regarding the application of sanctions, uncertainty around interpretation and the evolving nature of sanctions imposed on Iran, have created an atmosphere of uncertainty for businesses, and thus, compounded the complexity of the effects of sanctions. Economic sanctions imposed on Iran have covered various aspects of its economy and, the extent of their effects depends on how these sanctions are applied. The most effective economic sanctions are those that target channels of interaction with the international economy. The bodies responsible for the imposition of economic sanctions first identify the most vital arteries in the economic body of a country, and then, target those areas so as to that compel the targeted country to accept their requests. In this article, the effects of economic sanctions against Iran have been estimated using the macro-econometric model via providing the sanctions index in 15 macroeconomic relationships using statistics of 2002(2)-2023(1) and the 2SLS estimator. The results show that economic sanctions have had a negative effect on almost all sectors, however, the extent of the impact experienced strongly depends on the extent of the relationship of the sector in question with other countries. The findings show that: the elasticity of private sector investment and consumption compared with economic sanctions is -89.30 and -18.69 percent, respectively; The elasticity of oil revenues compared with economic sanctions is -30.72%; The elasticity of industrial goods export supply and intermediate goods export supply relative to economic sanctions is -59.21 and -11.82 percent, respectively; The elasticity of competitiveness of industrial goods, demand for money and the level of domestic prices compared with economic sanctions are -81.24, -13.59 and 20.73%, respectively.

Keywords

References

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Journal of Defense Economics and Sustainable Development
Volume 9, Issue 32
September 2024
Pages 29-65

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