Analysis of the Connectedness of Economic and Environmental Volatility in Iran (2006–2023)
Subject Areas : environmental economy
Saeed Kian Poor
1
,
Mohsen Hajian
2
,
Sepideh Azimi
3
1 - Assistant Professor, Department of Economics, Payam Noor University, Tehran, Iran
2 - Department of Economics, Payam Noor University, Tehran, Iran
3 - Instructor, Department of Basic Sciences, National University of Skills, Tehran, Iran
Keywords: Volatility Connectedness, Quantile Vector Autoregression, Economic–Environmental Variables, Iran,
Abstract :
The dynamic interactions between economic and environmental variables in Iran have become increasingly important in light of globalization challenges and climate change. This study uses the Quantile Vector Autoregression (QVAR) approach to examine volatility connectedness among economic variables (Economic Indicator, Economic Complexity, Globalization) and an environmental variable (CO₂ emissions) over the period 2006–2023. The objective is to analyze the interactions of these variables across the 25th, 50th, and 75th quantiles and identify their roles as transmitters or receivers of volatility under normal and crisis conditions. Annual data were preprocessed and differenced to achieve stationarity using the Augmented Dickey–Fuller (ADF) test, and were analyzed using spillover indices (TCI, NET, TO, FROM) and connectedness networks. The findings show that the Total Connectedness Index (TCI) rises to 33.84 in the 75th quantile (crisis conditions) and decreases to 17.13 in the 50th quantile (normal conditions), confirming a U-shaped pattern. The Economic Indicator and Economic Complexity acted as major transmitters of volatility during crises such as the global financial crisis (2006–2010), the China crisis (2014–2017), and the Russia–Ukraine war (2021–2023). In contrast, CO₂ emissions consistently remained a receiver, highlighting the high vulnerability of Iran’s environmental sector to economic shocks. Globalization also acted as a receiver in both tranquil and crisis periods, showing intensified vulnerability during the COVID-19 pandemic (2019–2022) and the Silicon Valley Bank crisis (2022–2023). The peak TCI in 2014 coincided with the sharp drop in oil prices, underscoring the critical influence of economic variables. These results emphasize the need to strengthen economic complexity through green industries and pursue active management of globalization during crises.
