Examining and comparing the economic effects of spillovers of investment risk in Iran: Computable General Equilibrium Model Approach

Abstract

the present paper evaluates the effect of investment risk spillover on key economic indicators using a CGE model and the GTAP.9 database have been used for this purpose. Two scenarios of 10% and 3% increase in investment risk are considered in order to investigate the effect of these changes according to a recent trend analysis of economic indicators in Iran and the trend of the Iranian economy towards globalization and opening of the economy windows. The results show that both scenarios reduce investment risk, inflation, gross domestic product and total investment. Government expenditures are reduced in all sectors of the economy except for the service sector, which is almost unchanged. The exports are increased in all sectors and the imports are declined in sectors of agriculture, industry and services. As well as, the results show that the import of the oil and gas sector has not been heavily influenced by the investment risk due to its governmental status. By assessing these two scenarios and the sensitivity of the macroeconomic indicators to the degree of risk change, it can be stated that the key economic indicators will be significantly improved by managing the risk of investment.