The Spillover Effect of Global Crude Oil Price Volatility on Iran’s Basic Metals Market: A Kalman Filter Approach
Keywords:
Basic metals exports, oil price volatility, state–space model, Kalman Filter, Iranian economyAbstract
The present study examines the spillover effect of global crude oil price volatility on the basic metals market in Iran during the period from 1996 to 2024. Given the importance of oil and basic metals in Iran’s economy—and their roles in export revenues and economic growth—the main objective of the research is to identify the transmission channels through which oil price volatility affects the export of mineral resources and basic metals, and to determine the magnitude and direction of these effects. To analyze the data, a state–space model using the Kalman Filter algorithm is employed, which enables the estimation of unobservable variables and time-varying parameters of the model. This method is particularly suitable for examining structural instability and the dynamic effects of market volatility. The findings indicate that crude oil price volatility, economic policy uncertainty, geopolitical risk, and energy consumption exert negative effects on basic metals exports, leading to reduced competitiveness and profitability in this sector. In contrast, capital and labor have positive effects on the export of basic metals, facilitating the enhancement of production and export performance. Furthermore, the effects of institutional quality and the economic complexity index in Iran appear to be limited and short-term. Based on the results, it is recommended that policymakers stabilize energy prices, reduce policy uncertainty, expand stable trade relations, invest in technology, and increase institutional transparency to support the sustainability and growth of basic metals exports. Using the recursive Kalman Filter algorithm, this study provides an accurate and dynamic portrayal of the interaction between global oil market volatility and the basic metals sector, offering valuable insights for policymakers and economic practitioners.
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Copyright (c) 2025 Seyed Mohammad Hassani, Marjan Daman keshideh, Amir Reza Keyghobadi, Seyed Nematollah Mousavi (Author)
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