<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Iran is facing a severe macroeconomics crisis after the US (re)imposed sanctions on its oil and gas exports in May 2018, followed by additional sanctions on metal exports in 2019. Its exports have collapsed triggering a contraction of the economy along with accelerating inflation and depreciating currency. Using the sectoral financial balances (SFB) model, we study the interrelationship between several macroeconomic parameters maintaining stock-flow consistency across time and sectors of the economy. Fiscal and monetary policy cannot reverse the consequences of the sanctions although fiscal deficits as a percentage of GDP will see a rise to accommodate the domestic private sector’s desire to accumulate financial asset accumulation. The lack of a strong monetary policy mechanism in Iran may, however, be unable to quell the impact of expansionary fiscal policy on inflation and depreciating rial. Given the limited macroeconomic policy options open to Iran in dealing with the crisis Iran, the only option may be political – a return to the negotiating table with the US.</p></abstract>

Iran is facing a severe macroeconomics crisis after the US (re)imposed sanctions on its oil and gas exports in May 2018, followed by additional sanctions on metal exports in 2019. Its exports have collapsed triggering a contraction of the economy along with accelerating inflation and depreciating currency. Using the sectoral financial balances (SFB) model, we study the interrelationship between several macroeconomic parameters maintaining stock-flow consistency across time and sectors of the economy. Fiscal and monetary policy cannot reverse the consequences of the sanctions although fiscal deficits as a percentage of GDP will see a rise to accommodate the domestic private sector’s desire to accumulate financial asset accumulation. The lack of a strong monetary policy mechanism in Iran may, however, be unable to quell the impact of expansionary fiscal policy on inflation and depreciating rial. Given the limited macroeconomic policy options open to Iran in dealing with the crisis Iran, the only option may be political – a return to the negotiating table with the US.

Macroeconomic Implications of US Sanctions on Iran: A Sectoral Financial Balances Analysis

Kautilya Entrepreneurship & Management Institute & Foundation to Aid Industrial Recovery

Narsee Monjee Institute of Management Studies (NMIMS)

Studies in Business and Economics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Iran is facing a severe macroeconomics crisis after the US (re)imposed sanctions on its oil and gas exports in May 2018, followed by additional sanctions on...

Macroeconomic Implications of US Sanctions on Iran: A Sectoral Financial Balances Analysis

Publié en ligne: 21 janv. 2020

Pages: 182 - 204

DOI: https://doi.org/10.2478/sbe-2019-0053

Mots clés
Iran, US sanctions, sectoral financial balances, macroeconomic crisis, fiscal policy

© 2019 Sivramkrishna Sashi et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Macroeconomic Implications of US Sanctions on Iran: A Sectoral Financial Balances Analysis

Publié en ligne: 21 janv. 2020

Pages: 182 - 204

DOI: https://doi.org/10.2478/sbe-2019-0053

Mots clésIran, US sanctions, sectoral financial balances, macroeconomic crisis, fiscal policy

© 2019 Sivramkrishna Sashi et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Mots clés
Iran, US sanctions, sectoral financial balances, macroeconomic crisis, fiscal policy