Macro-economy of Iran and Sanctions: A System Dynamics Approach

Document Type : Original Article

Authors

1 allameh tabatabaie university

2 Assistant Professor

3 National Defense University

Abstract

Modeling based on the dynamics of a four-sector economy is a powerful approach for analyzing the structure and long-term behavior of the macroeconomy. By identifying causal and feedback relationships among variables, it enables the simulation of various scenarios. The problem addressed in this research is the creation of an analytical and feedback-driven framework for the Iranian economy, based on four sectors: households, firms, government, and the external sector (sanctions and other variables). Utilizing a System Dynamics (SD) model within the Vensim software environment, this study analyzes each of the four sectors and their interconnections for the period 1978 to 2029 (where 1978–2024 involves simulations based on existing historical data, and 2025–2029 constitutes the forecasting years). The simulation results indicate that policies lacking deep insight into the functioning of Iran's macroeconomy are ultimately doomed to failure and "self-sanctioning." Given the feedback loops presented in the four economic sectors—which represent the economy's aggregate demand—various types of sanctions seek to inflict "multi-layered pain," steering the economic system toward continued stagflation and altering the target country's behavior to the point of degrading its status to that of a colony. This multi-layered pain acts as a multi-dimensional pressure, encompassing high commodity prices, restricted foreign exchange earnings, rising unemployment rates, and the creation of a destructive environment for investment. Considering the probable scenarios of intensifying sanctions, it is essential to simultaneously prioritize three counter-policies: the integration and targeting of policies, economic diversification and strengthening the production base, and the expansion of alternative interactions.

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Journal of Economics and Modelling
Volume 16, Issue 3 - Serial Number 63
February 2026
Pages 71-102

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