Abstract
In this chapter, Mashayekhi’s system dynamics model, which was built in 1978 to analyze Iranian economic development, is resurrected through a comprehensive restructuring and revalidation process. The focus of the original model was on the dependency of Iran’s economy on oil and its vulnerability to “petro dollars.” Since oil dependency is still a major issue in contemporary Iranian economic policy debates, reexamining Mashayekhi’s model is beneficial. It is shown that the original model is unable to reproduce the historical behavior of the Iranian economy from the mid-1980s onward. However, updating its exogenous variables, modifying some of its assumptions, and recalibrating some of its parameters significantly improve its ability to reproduce Iranian economic history. Revalidation of the modified model shows that it is fairly robust and generally reliable. Since the boundary of the original model was drawn somewhat narrowly, even the updated version presented in this chapter is an inadequate platform for analyzing many contemporary Iranian macroeconomic policies. However, the updated model is an excellent tool for analyzing questions directly related to the issue of Iranian oil dependency. Finally, it is argued that this chapter can serve as a starting point for those who wish to develop a system dynamics macroeconomic model of any resource-dependent developing nation.
Keywords
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- 1.
Rial is the Iranian currency unit.
- 2.
Telephone interview with Ali Mashayekhi on May 12, 2011.
- 3.
iThink Analyst v9.1.4, 1985–2010.
- 4.
- 5.
This has been done by Langarudi et al. (2011).
- 6.
Mashayekhi employed this assumption because the simulation period for the original M-model was 50 years and during this period domestic energy resources were sufficient for domestic energy consumption (see Footnote 10).
- 7.
Langarudi et al. (2011) have also addressed this issue.
- 8.
For a comprehensive description of the model’s structure see Mashayekhi (1978)
- 9.
A causal loop diagram presents only the essential feedback structure of a system dynamics model so that the most important elements of cause and effect can be examined. The actual resource allocation mechanism in the M-model is substantially more sophisticated.
- 10.
Simulations by Langarudi et al. (2011) show that Iran’s net export of energy won’t become negative until 2094. This result is yielded under this assumption that world demand for Iran’s oil is infinitive so Iran can export that portion of its produced oil remaining after domestic consumption.
- 11.
In the extreme, the smallness of a model’s time step is limited by the precision of the digital computer being used.
- 12.
Mathematical rules of thumb relating a model’s time step to its smallest time constant also exist in system dynamics modeling.
- 13.
Various numerical integration techniques have well-known strengths and weaknesses that come into play under different circumstances.
- 14.
- 15.
A summary of the M-model’s ability to replicate the dynamics of the key variables in the Iranian economy is presented at the end of this section in Table 2.
- 16.
Except for 1981, the highest growth rate after the revolution is 10.98 % in 1988 (BP 2012)
- 17.
The behavior of all of the M-model’s key variables was examined during the behavior mode sensitivity test but space limitations prevent their presentation in this chapter.
- 18.
Recall that this was an assumption in the original M-model.
- 19.
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Langarudi, S., Radzicki, M. (2013). Resurrecting a Forgotten Model: Updating Mashayekhi’s Model of Iranian Economic Development. In: Qudrat-Ullah, H. (eds) Energy Policy Modeling in the 21st Century. Understanding Complex Systems. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-8606-0_11
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