Evaluating the Impact of World Oil Prices on the External Current Account in Iran

This paper investigates the relationship between oil prices and some other economic variables on the current account of Iran by applying the generalized method of moment techniques to panel data for the 1978-2015 period. The explanatory variables represent domestic economic conditions (GDP growth, domestic investment and general government consumption expenditure), external economic conditions (openness, foreign direct investment and real exchange rate) and World economy condition (World interest rates). As expected, we find a positive and direct relationship between oil prices and the current account in Iran. We further observe that levels of domestic investment, economic growth, general government expenditure and World interest rates have negative impact on the current account, while levels of real exchange rate, foreign investment and openness positively impact the current account.