Oil, government's budget and economic growth in Iran

Recognition of economic growth determinants is one of the most important concerns for economists. In an oil exporting country, oil revenue plays the significant role for that economy alongside other economic growth determinants. This paper attempts to provide a clear picture of the actual role of oil in the Iranian economy by documentation of stylised facts regarding oil and economic growth. Available evidences suggest that oil revenue has a profound influence on the economy in different layers. Since oil revenue goes directly to public treasury and is expended by the government, it seems that government's management on this revenue would be a determinant for the economy. Accordingly, this paper offers an index, to evaluate this management, as government savings over oil revenue (GSOR). The higher level of GSOR shows the better situation. Finally, findings of a VAR approach including this indicator show that financing government expenditures by non-oil revenue, has positive effects on economic growth.