The effects of sanctions abolition on Iran’s economy variables: A positive analysis with dynamic stochastic general equilibrium approach

Iran's economy has faced a more severe economic sanctions over the past decade. One of the issues that has always been the subject of controversy in the Iranian economy and among economic experts, is what will be the impact of economic sanctions relief - including oil, banking and commercial sanctions - in the country; and especially How much will it be affected real levels of production, consumption and investment in the economy, by this issue? The purpose of this study is to analyze the effects of various economic sanctions on the Iranian economy, using the MIU Multi-part Model of Dynamic Stochastic General Equilibrium (DSGE).
Accordingly, the impact of various types of shocks resulting from the lifting of sanctions on the economy, is examined and evaluated, including:
l A permanent and positive productivity shock resulting from the release of the banking system from various sanctions.
l Constant shock of removing commercial barriers.
l Constant shock of rising crude oil sales.
l Stochastic shock of crude oil price drop due to increased supply by Iran.
l Shock related to increased transfer payments in the form of facilities and subsidies and facilitation of bank transactions.
l Simultaneous occurrence of constant shocks.
The results show that in the long run, productivity shocks can significantly affect real levels of consumption, capital, and total output; however, the answer to one question is important: How much is production efficiency (solo residue) affected by sanctions in the Iranian economy? Regarding to other constant shocks, overall that is expected The simultaneous occurrence of this shocks in long-term reduces inflation by about 1.5% and Increases real level of consumption by less than 0.5%, capital level by less than 1%, imported intermediate goods and added values resulted of them by less than 30%, and finally real output of the whole economy by less than 0.5 percent, resulting in a 12 percent decline in non-oil exports.