Program and Development Research

Program and Development Research

The Impact of Sanctions on Iran's Economic Growth: A Time-Varying Parameter Factor-Augmented Vector Autoregression (TVP-FAVAR) Approach

Document Type : Original Article

Authors
Sanaz Rahimi 1
Nasim Asharieen 2
Omid Ali Adeli 3
Soheil Roudari 4
1 PhD student, Department of Islamic Economics, Faculty of Economic and Administrative Sciences, University of Qom, Qom, Iran.‬‏
2 PhD student, Department of Economics, Majoring in International Economics, Mofid University, Qom, Iran.
3 Associate Professor, Department of Islamic Economics, Faculty of Economic and Administrative Sciences, Qom University, Qom, Iran
4 PhD Instructor
10.22034/pbr.2025.499050.1493
Abstract
During the years following the Islamic Revolution, Iran's economy has been impacted by international sanctions with varying degrees of intensity. In recent years, the scope and severity of these sanctions have increased, leaving profound effects on economic indicators, including gross domestic product (GDP). The aim of this study is to examine the impact of sanctions on Iran's economic growth during the 1360–1400 period (1981–2021) using the GDP index and a Factor-Augmented Vector Autoregressive (FAVAR) model combined with a Time-Varying Parameter (TVP) model. Variables such as liquidity, tax revenues, government current expenditures, exchange rate, income inequality, human capital, oil revenues, and sanctions are considered explanatory factors in the model. The model's results indicate the nonlinear behavior of variables in influencing economic growth. Specifically, positive shocks in tax revenues and government expenditures have positively impacted economic growth, whereas positive shocks in sanctions, liquidity, exchange rate, income inequality, human capital, and oil revenues have shown a negative impact on GDP. Therefore, the findings suggest that intensified sanctions have significantly weakened Iran's economic growth. These results highlight the necessity of adopting sustainable policies to reduce the economy's dependence on vulnerable external factors and enhance economic resilience.
Keywords
: Sanction
Economic Growth
Fiscal and Monetary Policies
TVP &‌‌‌ndash
FAVAR Model
Iran
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Program and Development Research
Volume 6, Issue 3 - Serial Number 23
Autumn 2025
Pages 247-287