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Abstract
The rapid increase in oil prices during the last decade has been perhaps the most significant shock experienced by the world economy. A great deal of attention has been focused on the impact of higher oil prices on oil importing countries, but relatively little on its impact on the oil exporting countries.1 The purpose of this paper is to develop a macro-model designed to analyze the impact of the rise in oil prices on the economy of Iran. The basic framework is highly aggregated and incorporates only the most important factors relevant to such an analysis. Nevertheless, the estimation results of the model are encouraging because they predict fairly accurately the movements of the main economic variables over the sample period (1960-77), which ends before the recent political developments.
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