Expenditure of oil revenue: an optimal-control approach with application to the Iranian economy

Book · Mon Jan 01 04:00:00 EST 1979

OSTI ID:6475123

Motamen, H

A new planning model examines the intertemporal investment strategies of a typical oil-based economy. The model is formulated in the framework of optimal control theory, the theory of optimum choice over time, and the variables to be chosen pertain to different dates. The characteristics of a petroleum-exporting country are expressed first by means of a macroeconomic model, which is subsequently invoked in the optimization process. The method is explicitly demonstrated by applying it to Iran as an example of an oil-producing country. The numerical solutions are compared with the actual policies practiced in Iran, and the differences between the two are examined in detail. The two differ markedly. The expansion program Iran attempted to implement after the oil boom of 1973/74 was well beyond the limits of the absorption capacity of the economy. Moreover, the results show clearly that the roots of the 1978/79 revolution in Iran were primarily economic and lay in poor financial management. Indeed, political factors have always been present in Iran, but it was the hazardous consequences of an ambitious development policy that brought about an atmosphere of economic tension culminating in the revolution. One of the most potentially useful features of the model is its predictive power. It can well project that the expansion pressures imposed on Iran during the mid 1970s would overheat the economy, bringing it to a point that would be beyond the control of the economic planner. 114 references, 22 figures, 23 tables.

• OSTI ID: 6475123
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020700 -- Petroleum-- Economics
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
294002* -- Energy Planning & Policy-- Petroleum
ASIA
DEVELOPING COUNTRIES
ECONOMIC ANALYSIS
ECONOMIC DEVELOPMENT
ECONOMICS
INCOME
INSTITUTIONAL FACTORS
INVESTMENT
IRAN
MATHEMATICAL MODELS
MIDDLE EAST
OIL-EXPORTING COUNTRIES
POLITICAL ASPECTS
SOCIO-ECONOMIC FACTORS