The Impact of Oil Price and Inflation Rate on Iran Economic Growth (Johansen-Jusilius co Integration)

According to this fact that achieving high and stable economic growth rate is one of the main issues in every country and fluctuations of oil price and its impact on inflation rate and its harmful effects on economic growth cause to difficulties, so this article tries to study and analyze the impact of the oil price and inflation rate on the macro economic variables and especially Iran economic growth. For doing so, Johansen-Jusilius co integration method was employed for investigation the long term relationship among model variables for period of 1971-2007. The results show a co integration relationship among variables of inflation rate, oil world price and economic growth. In addition the results of this research show that increase of oil price in the world markets has had significant and positive effect on Iran economic growth in the studied period and there is a reverse relationship between inflation rate and Iran economic variables. Classification of JEL: C22:F14:F43 th decade that led to economic regression in the west, oil and oil products were considered as important factor in production and in 80 th decade, the relationship between oil and economic growth gained attention of the analysts. Fluctuations of the oil price and its considerable effect on the macro economic variables were considered by the most of the economists. From experimental viewpoints, there are many reasons for the impact of oil price fluctuations on the macroeconomic variables. The fluctuations of oil price lead to irreversible reduction of investment, total demand and supply, changes in energy price and as a consequence change in consumption of energy, decreasing productivity of the work force, capital and potential production. According to this fact that achieving high and stable economic growth is important for countries in one hand and fluctuations of oil price and its impact on inflation rate especially on economic growth cause to fundamental problems in other hand, so this article aims to study and analyze the impact of the oil price and inflation rate on macro economic variables especially Iran economic growth. For doing so, Johansen-Jusilius co integration method was employed for investigation of the long term relationship among the model variables for years of 1971-2007. This research is based on theoretical principles and research methodology and finally conclusion and practical solutions are proposed. REVIEW OF LITERATURE Theoretical Principles According to the international commerce theories, developing countries have been employed economic primary specialists due to incorporating relative advantages and frequencies of the production inputs. Also foreign investment has been justified by abundance of the inputs in these countries. Some economists criticize international specialism because of dependency of economic on the primary products export. This group believes that international specialism production causes to dependency on the export incomes. The export incomes become instable and influence negatively on economic because of unpredictability and exogenous prices of the crude export products and fluctuations of the prices (Feder, 1982). Some economists believe that instability of the prices is sometimes good and in case of correct planning the markets could transact for prevention of price risks. But fluctuations of price for the consumers that are not under pressure of instable markets of the primary products but they share in oil products are painful. Energy products are important for oil and consuming products importers since they are the main inputs of the economic activities. Some theories support this view point that instability of prices influences not only on price upper levels but also it affects negatively on the macroeconomic variable in all price levels. The documents show that there is a