Applying System Dynamic Model For Macroeconomic Analysis of Yemen

Electronic copy available at: http://ssrn.com/abstract=1825905 Electronic copy available at: http://ssrn.com/abstract=1825905 Electronic copy available at: http://ssrn.
com/abstract=1825905

1
Applying System Dynamic Model for
Macroeconomic Analysis of Yemen
Professor Dr. Issam A.W. Mohamed
1

1.Abstract
The purpose of the System Dynamics method is to study the relationship between structure
and behavior in non-linear, dynamic systems. In such systems, the significance of various
structural components to the behavior pattern exhibited, changes as the behavior unfolds.
Changes in structural significance modify that behavior pattern which, in turn, feeds back to
change the relative significance of structural components. We develop a macroeconomic
model through which we can study the characteristics of the feedback between structure and
behavior. This model is based on multiplier-accelerator model, and inventory adjustment
model. This work is an extension of the work by Nathan Forrester on the use of basic
macroeconomic theory to stabilize policy analysis. The design of a System Dynamics model
begins with a problem and a time frame that contribute to the problem. They are listed and
their structural relationships sketched the factors with particular attention to characterizing
them as levels (or stocks) and rates (or flows) that feed or drain them. Levels and rates must
alternate in the model; no level can control another without an intervening rate or any rate
influence another without an intervening level.
2.Dynamic Hypotheses
The main assumption in the model is that exponential growth of oil production, GDP and
other variables in the real life cannot continue forever. Exponential growth implies a constant
doubling time. In all real systems, there will be limits, and when a system state approaches its
limit, stress takes place in the system.
3.The Model
INITIAL TIME = 1990
FINAL TIME = 2020 , TIME STEP = 1 YEAR

1
Professor of Economics, Alneelain University, Khartoum-Sudan. P.O. Box 12910-11111.
issamawmohamed@hotmail.com
Electronic copy available at: http://ssrn.com/abstract=1825905 Electronic copy available at: http://ssrn.com/abstract=1825905 Electronic copy available at: http://ssrn.com/abstract=1825905

2
1- POPULATION VIEW

Population 0
To 14
Deaths 15 to 44
Population
15 To 44
deaths
Maturation 64 to
65
Population
45 To 64
Reproductive
Lifetime
Population
65 Plus Maturation 44 to
45
Mortality 0 to 14
Mortality 15 to 44
Births Maturation 14 to
15
Deaths 0 to 14
Deaths 45 to 64
Deaths 65 Plus
Mortality 45 to 64
Mortality 65 Plus
Mortality 45 to 64
Table
Life Expectancy At Birth
Mortality 15 to
44 table
Mortality 0 to 14
table
Mortality 65 Plus
Table
Labor Force
Labor Force
Participation Fraction
Population
Total Fertility
<Time>
Population 1990
Poupulation 0 to 14
Rate In 1990
poupulation 15 to 44
rate in 1990
Population 45 To 64
rate in 1990
Population 65 plus
rate in 1990
Growth Rate of
Population
Total of
Manpower

3
Area of
Crops
Initial Crops Area
Culivated
Area
Initial Culivated
Area
Area of
Wheat and
Other Cereals
Area of
Cash Crops
Cash Crops Area
Rate
Wheat and Othrer
Cereals Area Rate
Initial Area of
Cash Crops
Initial Area of Qat
Area of Veg.
and Fruit
Area of Qat
Qat Area Rate
Growth Rate of Veg.
and Fruit Area
Initial Area of Veg.
and Fruit
Growth Rate of Cash
Crops Area
Growth Rate of Wheat
and Cereals Area
Culiivable
Area
Culivated Rate
Initial Culivable
Initial Rate of Wheat
and Others Cereals
Growth Rate of
Culivated Area
Growth Rate of
Qat Area
Area of
Fodder
Fodder Area Rate
Initial Area of
Fodder
Growth Rate of
Fodder Area
Growth Rate of
Crops
Crops Area Rate
Growth Rate of
Culivated Area Table1
Growth Rate of
Culivated Area Table2
<Policy Year1>
<Time>
Growth Rate of Qat
Area Table1
Growth Rate of Qat
Area Table2
Growth Rate of
Fodder Area Table1
Growth Rate of
Fodder Area Table2
Growth Rate of
Crops Table1
growth rate of
crops table2
<Policy Year1>
<Time>
Growth Rate of Veg.
and Fruit Area Table1
Growth Rate of Veg.
and Fruit Area Table2
and Cereals Area Table1
and Cereals Table2
Growth Rate of Cash
Crops Area Table1
Growth Rate of Cash
Crops Area Table 2
<Policy Year1>
<Time>
Veg and Fruit
Area Rate
Total Investment in
Agricultures Sector
Fraction of Investment
Allocated to Development the
Culivaed area
Culivaed area Table2
Effect of Growth In
Cereals Area
Effect of Growth in
Cereals Area Table
Water Quantity
Effect
Alocated to Farmers
Subsidy Table
Investment Rate Allocated
to Development culivated
area
Investment Rate
Allocated to Farmers
Subsidy
Alocated to Farmers
Subsidy
Fraction of Water
Quantity Effect Tabls
Fraction of Qat Area
Growth Effect Table
Qat Consumers
Rate
Fraction of Qat
Consumrs Rate Table
Fraction of Qat
Consumrs Rate
Fraction of Qat Area
Growth Effect
Fraction of Investment Allocated
to Development Agriclture
Manufacturig Table
Allocated to Development
Agriclture Manufacturig
Investment Rate Allocated to
Development Agriculture
Manufacturing
fraction of population
growth table
Fraction of
Population Growth
Fraction of Privet
Income Table
Fraction of Privet
Income
Fraction of Livestock
Number Table
Fraction of
Livestock Number
<Number of
Livestock>
<Total Domestic
Investment> Investment rate for
agriculiture sector
<Growth Rate of
Population>
<Income per
Capita $>
2- AREA OF AGRICULTURE VIEW

4
Fraction of Use New
Technology Effect Table
Productivity of Cash
Crops Area
Productivity of Qat
Per Hectar
Production of Qat
Production of
Cash Crops
Productivity of Veg.
and Fruit
Production of Veg.
and Fruit
Productivity of Wheat
and Other Cereals
Production of Wheat
and Other Cereals
Productivity of
Fodder Table1
Production of
Fodder
Normal Consumpiton
Rate of Cash Crops Per
Capita
Normal Individual
Demand of Cash Crops
<Population>
Normal Consumption of
Veg. and Frut per Capita
<Population>
Normal Individual
Demand of Veg. and
Fruit
Normal Consumption
Rate of Wheat and Other
Cereals Per Capita
Normal Individual
Demand of Wheat and
Other Cereals
<Population>
Total Local Demand
of Cash Crops
Tota Local Demand of
Veg and Fruit
Total Local Demand of
Wheat and Other Cereals
<Demand of Cash Crops
for Manufacturing Input>
<Demand of Wheat and
Others Cereals for
Manufacturing Input>
<Demand of Veg and
Fruit for Manufacturing
Input>
Export/Inport Gap of
Cash Crops
Wheat and Other Cereals
Productivity of Wheat and
Other Cereals Table1
Other Cereals Table2
Crops Area Table1
Crops Area Table2
and Fruit Table 1
and Fruit Table2
<Policy Year1>
<Time>
<Policy Year1>
<Time>
<Policy Year1>
<Time>
Fraction of Use New
Technology Effect
Level of
Technology
<Area of Wheat and
Other Cereals>
<Area of
Cash Crops>
Productivity of
Fodder Table2
<Area of Veg.
and Fruit>
<Area of Fodder>
productivity of
fodder
<Area of Qat>
Productivity of Qat Per
Hectars Table1
Productivity of Qat Per
Hectars Table2
Holding Rate Effect of Holding Rate in
Level of Technology Table
Effect of Holding Rate In
Level of Technology
<Water Quantity
Effect>
Effect of Water Quntity In
Productivity of Wheat and Other
Cereals Area Table
Effect of Water Quntity In
Other Cereals Area
Productivity Mean of
Cereals Area
Fraction of Manufacturing Input
Allocated to Development The
Productivity of Cash Crops Area
Table
Fraction of Manufacturing Input
Allocated to Development The
Cash Crops Area
Fraction of Government Subsidies
Table
Fraction of Government Subsidies
Government Subsidies
to Agriculture Sector
Veg and Fruit Area
Fraction of New Technology
and Facilities of Storing up
Table
Fraction of New
Technology and Facilities
of Storing up
Agriculiture Input Allocated
to Development Veg and
Fruit Area
Agriculture Input
Input Rate to Development
the Productivity of Veg and
Fruit Area
Fraction of Use the
Agricultural Exterminators
Table
Fraction of Use The
Agricultural Exterminators
Fraction of Water Quantity
Effect for Qat Area
Productivity Table
Fraction of Water Quantity
Effect for Qat Area
Productivity
Average of Agriculture
Exterminators Consumption
per Year
Productivity Mean
of Qat Area
Export/Import Gap
of Veg and Fruit
Effect of New Technology
Table
Effect of New Technology
<Current Transfers and
Current Subsidies>
Fraction Government
Subsidies to Agriculture
Sector
<Input Value of
Manufacturing
Production>
3- CROPS PRODUCTION VIEW

5
Production of
Surface Fish
Use New Tecnology in
Caching Tools Table
Fraction of Investment to Use
New Tecnology in Caching
Tools for Surface Fish
Normal Consumption Mean
of Surfece Water Fish per
Capita
Normal Individual
Demand of Surface
Water Fish
<Population>
Srface Water Fish
<Demand of Surface Water
Fish for Manufacturing Input>
Surface Water Fish
Production Value
of Livestock
Value of Meat
Value of Milk
Value of Poultry
Meat
Value of Eggs
value of Honey
Value of
Leather
Value of Whool
Number of
Livestock
Livestock Birth
Rate
Livestock Death
Rate
Initial No of
Livestock
Growth Rate of
Livestock Birth
Growth Rate of
Livestock Death
Slaughtering Rate
Slaughtering Growth
Rate of Livestock
Consumption Rate
for Meat
Consumption Rate
for Whool
Consumption Rate
for Leater
Consumption Rate
for Milk
Productivity of Meat
per Head
Productivity of
Leather per Head
Productivity of
Whool per Head
Productivity of Milk
per Head
Price of Meat
Production per Ton
Price of Leather
Production per Ton
Price of Whool
Production per Ton
Price of Milk
Production per Ton
Production of Surface
Fish per Year Table1
<Total Investment in
Agricultures Sector>
Agriculiture Investment
Rate in Fishing Activity
Total Investment in
Fishing Activity
Manufacturing>
Production of Surface
Allocated to Increase the
No of Boat
Manufacturing Investment Rate
Production of Fish
Production Mean of
Surface Fish per Year
Noumber of Boats
Table
Produvtivity per
Boat
Effect of Boat
Number
Investment Rate Allocated
to Increase the Boat
Number
Development the Caching
Tecnology
Effect of New
tecnology in Caching
Tools
<Time>
<Policy Year1>
Production of
Deep Fish
Production of Deep
Production of Deep
Fishing Activity>
Production Mean of
Deep Fish per Year
Normal Individual
Demand of Deep Water
Fish
Deep Water Fish
Normal Consumption Mean
of Deep Water Fish per
Capita
Export/inport Gap of
Deep Water Fish
<Population>
Number of Fishng
Company Table
Productivity per
Company
Fractionof Investment
Allocated to Increase the No
of Companies
Investmet Rate Allocated to
Incease the Companies
Number
Effect of Fishing
Compamnies Number
<Demand of Deep Water
Fish for Manufacturing
Inputs>
Productin of Other
Caches
Production of Other
Caches Table1
Production of Other
Caches Table2
<Time>
<Policy Year1>
Production Mean of
Other Caches per Year
Other Caches
Total Local Demand
of Other Caches
Normal Individual
Demand of Other
Caches
Normal Consumption
Mean of Other Caches per
Capita
<Demand of Other Aquatic
Caches Manufacturing Input>
Develop Other Caches
Production
Allocated to Develop Other
Caches Production
Fraction of Investment in
Fishing Activity in Other
Caches Table Effect of Investment in
Fishing Activity
4- FISHING PRODUCTION VIEW

6
<Production of
Veg. and Fruit>
<Production of
Cash Crops>
<Production of Wheat
and Other Cereals>
<Production of
Qat>
Price of Cash
Crops Table1
Price of Wheat and
Other Creals Table1
Price of Veg.and
Fruit Table 1
Price of Qat
Table1
Price of Fooder
Table 1
Price of Cash Crops
Table2
Price of Veg. and Fruit
Tabl2
Chang in Cash
Crops Price
Supply of Cash
Crops
Demand of Cash
Crops
Reference Cash
Crops Price
cash crops supply
elasticity
Cash Crops
Demand/Supply
Balance
Cash Crops
Demand Elasticity
Effect of Cash Crops
Demand/Supply Balance
on Price
Cash Crops
Indicated Price
Sensittivity of Cash crops
Price to Demand/Supply
Balance
<Total Local Demand
of Cash Crops>
Price of Cash
Crops
Value of Cash
Crops Production
<Time> <Policy Year1>
price of wheat and other creals
table2
Change in Wheat and
Other Creals Price
Price of Wheat and
Other Creals
Value of Wheat and
Other Creals Production
<Time>
<Policy Year1>
Reference Wheat and
Other Creals Price
Supply of Wheat and
Other Creals
Demand of Wheat
and Other Creals
Wheat and Other
Creals Supply Elasticity
Wheat and Other Creals
Demand Elasticity
Wheat and Other Creals
Demand /Supply Balance
Effect of Wheat and Creals
Demand/Supply Balance on
Price
Sensittivity of Wheat and Other
Creals. Price to
Wheat and Other
Creals Indicated Price
<Total Local Demand
of Wheat and Other
Cereals>
Change in Veg and
Fruit Price
Price of Veg and
Fruit
Value of Veg and
Fruit Priduction
Reference Veg and
Fruit Price
Supply of Veg
and Fruit
Veg and Fruit
Supply Elasticity
Demand of Veg
and Fruit
Veg and Fruit
Demand Elasticity
<Policy Year1>
<Time>
Veg and Fruit Demand
/Supply Balance
Effect of Veg and Fruit
Price
Sensittivity of Veg and Fruit
Balance
Veg and Fruit
Indicated Price
<Tota Local Demand
of Veg and Fruit>
Price of Qat Tabl2
Change in Qat
Price
Price of Qat
Value of Qat
Priduction
Reference Qat
Price
Supply of Qat
Qat Supply
Elasticity
Demand of Qat
Qat Demand
Elasticity
<Policy Year1>
<Time>
Qat Demand
/Supply Balance
Effect of Qat
on Price
Sensittivity of Qat Price to
Qat Indicated
Price
Price of Fodder Table 2
Change in Fodder
Price
Price of Fodder
Value of Fodder
Priduction
Reference Fodder
Price
Supply of Fodder
Fodder Supply
Elasticity
Demand of
Fodder
Fodder Demand
Elasticity
<Policy Year1>
<Time>
Fodder Demand
/Supply Balance
Effect of Fodder
on Price
Sensittivity of Fodder Price
to Demand/Supply Balance
Fodder Indicated
Price
<Production of
Fodder>
<Export/Import Gap
of Veg and Fruit>
Price of Surface
Fish Table2
Change in Surface
Fish Price
Refrence Surface
Fish Price
Price of Surface
Fish Table1
Price of Surface
Fish
Demand of
Surface Fish
Supply of
Surface Fish
Value of Surface
Fish Production
Surface Fish
Demand Elasticity
Surface Fish Supply
Elasticity
Surface Fish
Demand/Supply
Balance
<Total Local Demand
of Srface Water Fish>
<Export/Inport Gap of
Surface Water Fish>
<Production of
Surface Fish>
Effect of Surface Fish
On Price
Sensittivity of Surface Fish
Balance
Surface Fish
Indicated Price
Price of Other
Caches Table 2 Change in Other
Cache Price
Refrence Other
Caches Price
Price of Other
Caches Table1
Price of Other
Caches
Demand of Other
Caches
Supply of Other
Caches
Value of Other
Caches Production
Other Caches
Demand Elasticity
Other Caches
Supply Elasticity
Other Caches
Demand/Supply
Balance
Effect of Other Caches
Price
Sensittivity of Other Caches
Balance
Other Caches
Indicated Price
Price of Deep
Table2
Change in Deep
Fish Price
Refrence Deep
Fish Price
Price of Deep Fish
Table1 Price of Deep Fish
Demand of Deep
Fish
Supply of Deep
Fish
Value of Deep Fish
Production
Deep Fish Demand
Elasticity
Deep Fish Supply
Elasticity
Deep Fish
Effect of Deep Fish
on Price Sensittivity of Deep Fish
Balance
Deep Fish
Indicated Price
<Total Local Demand
of Deep Water Fish>
<Export/inport Gap
of Deep Water Fish>
<Production of
Deep Fish>
<Total Local Demand
of Other Caches>
<Export/Inport Gap
of Other Caches>
<Productin of
Other Caches>
<Time>
<Policy Year1>
<Export/Inport Gap
of Cash Crops>
Wheat and Other Cereals>
5- Equilibruim Price and Value of Crops View

7
Production Rate of
Curd Oil
Growth Rate of Curd
Oil Production1
Price Per Barrel
Exchange Price
Fraction Investment Which
Allocated to Development Oil
Production Table
Government
Share Rate
Local Consumption
Rate of Oil
Allocated to Development Oil
Production
Value of Oil
Export YR
Expectation
of Oil
Reserve
Value of Local
Consumption of Curd
Oil YR
Initial of Expectation
of Gas Reserve
Production Rate
of Gas
Net Government Share
of Curd Oil Export
Total Local
Consumption of Oil1
Government Share of
Oil Export Rate
Government Share of
Curd Oil Production
Companies Share
Total Investment in
Oil Sector
Growth Rate of Gas
Production
Total Investment in
Gas Sector 1
Development
Production Rate of LPG
Value of Local
Consumption of GasYR
Value of Gas
ExportYR
Price of Gas YR Per
Ton Table1
Value of Export
Gas $
Local Consumption
Rate of Gas Table1
<Time>
Input of Gas
Production
Input Rate FromGas
Production
Total Value of Oil
Export
Value of Curd Oil
Production
Productivity Mean
Per Sector Table1
Input Value of Curd
Oil Production
Net Value of
Curd Oil $
<Time>
Input Rate of OiL
Productivity Mean
per Sector
Fraction of Curd Oil
Price Per Barrel 1
Fraction of Curd Oil
Price Per Barrel 2
Government Share of
Curd Oil Rate Table1
Government share of
Curd Oil Rate Table2
Policy Year1
Number of Oil
Sector Table1
Number of Oil
Sector 2
Exchange Price
Table1
Exchange Price
Table 2
<Time>
Reserve of LPG
Initial Value of LPG
Reserve
Policy Year2
<Time>
Value of Gas
Production
Net Value of Gas
Production
Local Consumption
Rate of Gas
<Policy Year1>
Price of Gas YR
Per Ton
Fraction of Investment Which
Productivity Mean of Sectors Table
Fraction of Investment Which
Productivity Mean of Sectors
LPG Production
Table1
Gas Production
Allocated to Development Gas
Production
productivity mean of
LPG per oil sector
Production Table1
Expectation of
Natural Gas
Reserve.
Production Rate of
Natural Gas
Production Table 2
Total Investment in
Gas Sector 2
LPG Production
Table2
Productivity of LPG
Per Oil Sector
Development Production
Rate of Natural Gas
Total Production
of Gas
Value of Curd Oil
production YR
<Total Domestic
Investment>
Investment Rate for
Oil Sector
TOTAL VALUE OF GAS
AND OIL EXPORT
in Gas Sectore
6- Oil and Gas Production View

8
Oil Refining
Other
Munfacturing
Foodstuffs and
Beverage
Tobacco
Textile Clothing
and Leather
Wood Products
Printing and
Publishing
Non-Metalic
Products(Structural)
Worked Metal
Products
Rawmaterials
Wags
Others Inputs
Internal Sorces
Mining and
Quarring Sorces
value of agriculturs
and fishing input
Demand of Cash Crops
for Manufacturing Input
Manufacturing
Consumption Rate of
Cash Crops
Demand of Wheat and
Others Cereals for
Manufacturing Input
manufacturing consumption
rate of wheat and others
cereals
manufacturing
consumption rate of veg.
and fruit
Demand of Surface Water
Input
manufacturing
consumption rate of
surface water fish
Demand of Deep Water
Inputs
manufacturing
consumption of deep
water fish
Demand of Other Aquatic
Caches Manufacturing Input
manufacturing
consumption rate of
aquatic caches
Water Fuil and
Elictricity
<Foodstuffs and
Beverage>
<Tobacco>
<Textile Clothing
and Leather>
Manufacturing Input rate of
Other Mining and Quaring
Total Investment
in Manufacturing Manufacturing
Investment Rate
Input Value of
Manufacturing
Production
Output Value of
Manufacturing
Production
Fraction of Manufacturing
Investment Allocated to
Development Foodstuffs
Production Value
Effect of Investment
Allocated to Foodstuffs
Fraction of Agriculture
Investment Allocated to
Manufacturing
Output of Foodstuffs
and Beverage Table 2
effect of agriculture
investment allocated to
manufacturing
Output of Tobacco
Table2
Output of Wood
Products Table2
Output of Printing and
Publishing Table2
Output of Worked
Metal Products Table2
Output of Oil
Refining Table 2
Fraction of Manufacturing Investment
to Development Other Munufacturing
Which Depended on Agriculture
Effect of Manufacturing Investment to
Development Other Manufacturing
Which Depended on Agricutlture
Fraction of Manufcturing
Investment to Development
Other Manufacturing
Effect of Manufacturing
Investment to Development
Other Manufacturing Output of Non-metalic
Products(Structural) Table2
Value of Manufacturing
Production Export
Value of Manufacturing
Production Consumption
Employees Rate in
Manufacuring Sector
Number of Paid Permament
Employees in Manufacturing
Sector
Consumption Rate of
Manufacturin Production
Demand of Veg and Fruit
for Manufacturing Input
Output of Foodstuffs
and Beverage Table1
<Time>
<Policy Year1>
Output of Tobacco
Table1
Output of Textile
,Clothing and Leather
Table1
Output of Wood
Products Table1
<Time>
<Policy Year1>
Output of Printing and
Publishing Table1
Output of Non-metalic
Products(Structural) Table1
Output of Worked
Metal Products Table1
Output of Oil
Refining Table1
<Time>
<Policy Year1>
<Price of
Cash Crops>
<Price of Wheat
and Other Creals>
<Price of
Deep Fish> <Price of
Surface Fish>
<Price of Other
Caches>
<Price of Veg
and Fruit>
<Value of Local
Consumption of Curd
Oil YR>
<Value of Local
Consumption of GasYR>
Input Value of
Manufacturing Input
Table1
<Time>
<Policy Year1>
Mean of Output of
Foodstuffs and Beverage
Output of Textile
,Clothing and Leather
Table2
External Sorces import
of manufacturing
Value of
Manufacturig Export
Export Rate of
Manufacturing
import rate of
manufacturing
<Employment for Private,
Ngovernment Organizations and
International Organizations>
<Monthly Average wages for
Private,Nongovernment Org. and
International Org. sector>
<Total Domestic
Investment> NET EXPORT VALUE OF
MANUFACTURING
PRODUCTION
Agricultures Sector>
Fraction of Oil Investment
Allocated to Manufacturing
Oil Sector>
Effect of Oil
Investment
Fraction Water Fuil
and Elictricity
<Electricity and
water>
7- Manufacturing Production View

9
Total of Agriculture
Production
<Value of Cash
Crops Production>
<Value of Deep
Fish Production>
<Value of Fodder
Priduction>
<Value of Other
Caches Production>
<Value of Qat
Priduction>
<Value of Surface
Fish Production>
<Value of Veg and
Fruit Priduction>
<Value of Wheat and
Other Creals Production>
Industries
Mininig and
Quaring
<Value of Gas
Production>
<Value of Curd Oil
production YR>
Mining and
Quarrying Excluding
Oil
Value of Mining and
Quarrying Excluding
Oil Table1
Value of Mining and
Quarrying Excluding
Oil Table2
<Policy Year1>
<Time>
Electricity and
water
Electricity and Water
Production Table1
Electricity and Water
Production Table2
Construction and
Building
Construction and
Building Production
Table1
Construction and
Building Production
Table2
Wholesale and Retail
Trade, Restaurants, Hotels
and Repair
Wholesale and Retail Trade,
Restaurants, Hotels and
Repair Table1
Wholesale and Retail Trade,
Restaurants, Hotels and
Repair Table2
Transport, Storage
and Communications
Transport, Storage and
Communications Table1
Transport, Storage and
Communications Table2
Financing, Insurance, Real
Estate and Business Services
Estate and Business
Services Table1
Estate and Business
Services Table2
Personal and
community services
Personal and
Community
Services Table1
Personal and
Community
Services Tble2
Producers of
Government Services
Producers of
Government
Services Table1
Producers of
Government
Services Table2
Producers of Non
Profit Bodies
Serving Families
Producers of Non Profit
Bodies Serving Families
Table1
Producers of Non Profit
Bodies Serving Families
Table2
Custom Duties
Customduties
Table1
Customduties
Table2
GDP at Market
Price
Imputed Bank
Services
Imputed Bank
Services Table1
Imputed Bank
Services Table2
<Time>
<Policy Year1>
<Time>
<Policy Year1>
<Time>
<Output Value of
Manufacturing
Production>
8- Total Production View

10
Government
expndture
Consumption
Aggregate
Demand
Average Propensity
to Consume
Wages and Salery for
Public Sector
Current Transfers and
Current Subsidies
<Labor Force>
Employment
Average
Proponsity to Save
Total Saving
Saving Rate
Investment from
Savings
Investment
Fraction
Total Domestic
Investment
Investment
Fraction Table1
Investment
Fraction Table2
<Time> <Policy Year1>
Capital
Capital Investment Capital
Depreciation
Foriegn Investment
Foriegn Investment
Table1
Foriegn Investment
Table2
Net Lending to the
Rest of The World
Current
Disposable Income
Government
Transfer
Undirect Tax
Revenue
Indirect Taxes
(net)
Average Life of
Capital
Unemployment
Ratio
Rate of Contribution to
The Economic Activity
<Total of
Manpower>
Tax Revenue
Table1
Tax Revenue
Table2
Employment for
Public Sector
Fraction of
Employment for Public
Sector
Monthly Average
Wages for Public
Sector
Employment for Private,
International Organizations
Fraction of Employment for Private,
International Organizations
Monthly Average wages for
Private,Nongovernment Org. and
International Org. sector
Wage and Salary for
Private Sector
DEBT
Net Gevernmet
Defecit
Government
Revenue
Total Government
Expenditure
Loan Payment
Interest Rate
Lending Rate
Goods and Service
Expenditures
Taxes Revenue
<Undirect Tax
Revenue>
Direct Taxes
Non-Tax
Revenues:
Capital Revenues Properties and
Projects Income
<Value of Oil
Export YR>
<Value of Gas
ExportYR>
<Value of Local
Consumption of Curd
Oil YR>
<Value of Local
Consumption of GasYR>
Debt Commitment
Percentage of Debt
to Production
Reserve Assets
Reserve Assets
Table1
Reserve Assets
Table2
<Policy Year1>
<Time>
Current Tansfers and
Current Subsidies
Table1
Current Transfers and
Current Subsidies
Table2
<Current Disposable
Income>
Fraction of Direct
Taxes
fraction of subsidy
Goods and Service
Expenditures Table1
Goods and Service
Expenditures Table2
<Time>
Government Revenue
fromProfit Surplus
Agricultural Profit
Manufacturing
Profit
<Total of Agriculture
Production>
Fraction of
Agricultural Profit
Fraction of
Manufacturing
Profit
<Output Value of
Manufacturing
Production>
Debt
CommitmentTable1
Debt Commitment
Table2
Time to Acquire
Loans
Effect of Debt Output
on Desired Loan
Effect of Debt Output on
Desired Loan Table
Capital Revenues
Table1 Capital Revenues
Table2
Net Gevernmet
Defecit Rate
Incomper Capit YR
<Population>
Income per
Capita $
<Exchange Price>
Privet
Consumption
Fraction of Privet
Consumption
<GDP at Market
Price>
Employment Rate
<Desired leon>
Net Export
Net Agreculutre
Export
<TOTAL VALUE OF
GAS AND OIL
EXPORT>
<Export/Import Gap
of Veg and Fruit>
<Export/Inport Gap
of Cash Crops>
Other Caches>
<Export/inport Gap of
Deep Water Fish>
Surface Water Fish>
Wheat and Other Cereals>
<GDP at Market
Price>
Fraction of
Employment Rate
<NET EXPORT VALUE OF
MANUFACTURING
PRODUCTION>
Maturity Period
9- Aggregate Demand and GDP View

11

Desired Investment
Desired Capital
Desired leon
Time to Adjus
Capital
<Capital>
<Capital
Depreciation>
Exponent on
Capital
Real Interest Rate
<Current Disposable
Income>
<Average Life of
Capital>
<Total Domestic
Investment>
10- Desired View

12
4.Initial Simulation
It is a state of the system before our policies through 1990-2020

The figure shows growth of population, Labor Force and Growth Rate of Population
through 1990-2020 in initial state of the system.

=
n
nt t
1

, n=1,2..,4
see appendix(1)

1 1 1
0
( i )dt m d b
t
t
t
t
+ =
}
2 2 2 1 2
) (
0
i dt m d m
t t
t
t
t t
+ =
}

3 3 3 2
) (
0
3
i dt m d m
t t
t
t
t
t
+ =
}

4 4 3 4
) (
0
i dt d m
t
t
t
t t
+ =
}

Figure (6-1) Population, Labor Force and Growth Rate of Population
1 Dmnl
20 M Person
40 M Person
0.75 Dmnl
15 M Person
30 M Person
0.5 Dmnl
10 M Person
20 M Person
0.25 Dmnl
5 M Person
10 M Person
0 Dmnl
0 Person
0 Person
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Time (Year)
Growth Rate of Population: initial simulation Dmnl
Labor Force: initial simulation Person
Population: initial simulation Person

13
( )
)]
15
1
( ) [( ]
5 . 0 [
) (
1
1 1 1
2
1 1
1 t
t t t
t
t t
t
mo
mo
RL
F
m d b
t

- + -
- -
= + =
c
c

( )
(
-
+ -
-
= + =
c
c
30
) 1 (
) (
15
1
) (
2 2
2 2
1 1
2 2 1
2 t t
t t
t t
t t t
t
mo
mo
mo
m d m
t

( ) ( )
(
-
+ -
= + =
c
c
20
1
) (
30
1
) (
3 3
3 3
2 3
3 3 2
3 t t
t t
t t
t t t
t
mo
mo
mo
m d m
t

( )
( )
t t
t t
t t
t
mo
mo
d m
t
4 4
3 3
4 3
4
20
1
-
-
= =
c
c

Where
nt
= population number
F=Total fertility=5.8 child/wn
i
n
=Initial value of population ,n=1,2..,4
m
nt
= Maturation rate ,n=1,2..,4 ,t=1,2,3.,30
mo
nt
= Mortality fraction
n=Age group
t=Time,(1990-2020)
d= death rate
b=birth rate
RL=Reproductive Lifetime=30 years

Table (1) Result of Initial Simulation of Population View

Time
(Year)
Growth Rate of Population Labor Force
(person)
Population
(person)

1990 0.0362015 4.44635e+006
1.28086e+007
1991 0.0370693 4.69488e+006
1.31423e+007
1992 0.037761 4.93718e+006
1.34957e+007
1993 0.0383056 5.1744e+006
1.38674e+007
1994 0.0387281 5.40761e+006
1.42561e+007
1995 0.0390499 5.63772e+006
1.46609e+007
1996 0.0392891 5.86559e+006
1.50809e+007
1997 0.0394609 6.09195e+006
1.55153e+007
1998 0.039578 6.31748e+006
1.59637e+007

14
1999 0.039651 6.54279e+006
1.64255e+007
2000 0.0396888 6.76845e+006
1.69006e+007
2001 0.0396987 6.99496e+006
1.73886e+007
2002 0.0396867 7.22279e+006
1.78893e+007
2003 0.0396578 7.45236e+006
1.84027e+007
2004 0.039616 7.68409e+006
1.89288e+007
2005 0.0395646 7.91833e+006
1.94675e+007
2006 0.0395064 8.15545e+006
2.0019e+007
2007 0.0394434 8.39577e+006
2.05833e+007
2008 0.0393775 8.6396e+006
2.11607e+007
2009 0.03931 8.88725e+006
2.17513e+007
2010 0.0392421 9.13898e+006
2.23554e+007
2011 0.0391745 9.39509e+006
2.29731e+007
2012 0.039108 9.65584e+006
2.36049e+007
2013 0.0390431 9.92148e+006
2.4251e+007
2014 0.0389802 1.01923e+007
2.49118e+007
2015 0.0389195 1.04684e+007
2.55875e+007
2016 0.0388613 1.07503e+007
2.62787e+007
2017 0.0388056 1.10379e+007
2.69856e+007
2018 0.0387525 1.13317e+007
2.77086e+007
2019 0.0387021 1.16319e+007
2.84483e+007
2020 0.0386543 1.19386e+007
2.9205e+007

15

Figure (2-5) Cultivated Area, Crops, Qat, Fodder Area
2 M hectar
2 M hectar
400,000 hectar
2 M hectar
1.5 M Hectar
1.5 M Hectar
300,000 Hectar
1.5 M Hectar
1 M Hectar
1 M Hectar
200,000 Hectar
1 M Hectar
500,000 Hectar
500,000 Hectar
100,000 Hectar
500,000 Hectar
0 Hectar
0 Hectar
0 Hectar
0 Hectar
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Time (Year)
Area of Crops: Initial Simulation Hectar
Area of Fodder: Initial Simulation Hectar
Area of Qat : Initial Simulation Hectar
Cultivated Area: Initial Simulation Hectar
Figure (2-5) Cultivable Area, Cultivated Area and Cultivated Rate
800,000 Hectar
200,000 Hectar/Year
2 M Hectar
600,000 Hectar
100,000 Hectar/Year
1.5 M Hectar
400,000 Hectar
0 Hectar/Year
1 M Hectar
200,000 Hectar
-100,000 Hectar/Year
500,000 Hectar
0 Hectar
-200,000 Hectar/Year
0 Hectar
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Time (Year)
Cultivable Area: Initial simulation Hectar
Cultivated Rate: Initial simulation Hectar/Year
Cultivated Area: Initial simulation Hectar

16

}
+ = dt ica cdr cbl
t t
] [
See appendix (2)

) (
t cbl
cbl
t
cbl
=
c
c

icda dt far qar car cdr cd
t t t
t
t
t t
+ + + =
}
)] ( [
0

( ) ( ) ( )) (( ) ( (
t qat t fodder t crops t cbl
cd cd cd cbl
t
cd
+ + =
c
c

( ) ica dt wcar vfar ccar car ca
t t t
t
t
t t
+ + + =
}
)] ( [
0

( ) ( ) ) ( ) ( ) ( ) (
andCereals Wheat Fruit and Veg. t t t cashcrops t crops
ca ca ca cd
t
ca
+ + =
c
c

icca dt ccar cca
t
t
t t
+ =
}
0

Figure (4-5) Area of Crops, Cash Crops, Wheat and other Cereals, Veg. and Fuit Area
800,000 Hectar
2 M Hectar
600,000 Hectar
1 M Hectar
580,000 Hectar
1.5 M Hectar
450,000 Hectar
900,000 Hectar
360,000 Hectar
1 M Hectar
300,000 Hectar
800,000 Hectar
140,000 Hectar
500,000 Hectar
150,000 Hectar
700,000 Hectar
-80,000 Hectar
0 Hectar
0 Hectar
600,000 Hectar
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Time (Year)
Area of Cash Crops: Initial Simulation Hectar
Area of Crops: Initial Simulation Hectar
"Area of Veg. and Fruit: Initial Simulation Hectar
Area of Wheat and Other Cereals: Initial Simulation Hectar

17
) (
t cashcrops
ca
t
cca
=
c
c

ivfa dt vfar vfa
t
t
t t
+ =
}
0

) (
. t andfruit veg
ca
t
vfa
=
c
c

iwca dt wcar wca
t
t
t t
+ =
}
0

) (
tan t dcereals wheaq
ca
t
wca
=
c
c

ifoda dt fodar foda
t
t
t t
+ =
}
0

) (
t fodder
cd
t
foda
=
c
c

iaqta dt qatar qata
t
t
t t
+ =
}
0

) (
t qat
cd
t
qata
=
c
c

] 2 )] ( [ , 1 ) (
,
T t fid T t t
creals wheat t cbl
e e =

)] ( [ AGINV fid fid
dcbla table
=

) (TINV AGINV
AGINV
=

Where
cbl=Cultivable Area
cd=Cultivated Area
ca=Area of Crops
cca=Area of Cash Crops
vfa="Area of Veg. and Fruit"
wca=Area of Wheat and Other Cereals
foda=Fodder Area
qata=Qat Area
group
=Growth Rate of Area
i
group
=Initial value of Area
T1= Time period before policy year (1990-2005)

18
T2= Time period after policy year (2006-2020)
fid= Fraction of Investment Allocated to Development the Cultivated area
k= Effect of Growth in Cereals Area
dcble
=Coefficient of Development cultivated area
AGINV= Total Investment in Agricultures Sector
AGINV
= Coefficient of Investment in Agricultures Sector
TINV= Total Domestic Investment

Total Values of Agriculture Production = Value of Cash Crops Production + Value of
Deep Fish Production + Value of Fodder Production +Value of Other Caches
Production + Value of Qat Production +Value of Surface Fish Production + Value of
Veg and Fruit Production + Value

Where
TVAP
t
= Total Values of Agriculture Production
VCP=Value of Crops Production
VFP=Value of Fishing Production
PVQ
t
=Production Value of Qat
PVF
t
=Production Value of Fodder

h=Number of agriculture Crops
j=Number of fishing kinds
And
VCPi= ccprov
t
+wcprov
t
+vfprov
t
Figure (5-5) Net agriculture Export, Agriculture Investment and Net Export
0 Rial/Year
1e+013 Rial/Year
2e+012 Rial/Year
-15 M Rial/Year
7.5e+012 Rial/Year
1.5e+012 Rial/Year
-30 M Rial/Year
5e+012 Rial/Year
1e+012 Rial/Year
-45 M Rial/Year
2.5e+012 Rial/Year
500 B Rial/Year
-60 M Rial/Year
0 Rial/Year
0 Rial/Year
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Time (Year)
Net Agriculture Export : Initial simulation Rial/Year
Total Investment in Agricultures Sector: Initial simulation Rial/Year
Total Value of Agriculture Production: Initial simulation Rial/Year

19
Ccprov
t
=
t
cashcrops
t
cpro P c *

ccpro
t
=cca
t
* ccproy
t

Where
ccprov=C ash Crops Productive Value
wcprov=Wheat and Careals Productive Value
=Productivity Mean of Cash Crops Area
1
= coefficient of Current Transfers and Current Subsidies
2
=Coefficient of Input Value of Manufacturing Production
( ) 2 ) ( , 1
0
T t iP dt xccp T t t
cashcrops
t
t
cashcrops
t
cashcrops
t
e + e P = P
}

|
|
.
|
\
|
+ =
c
c
}
t
t
cashcrops
t t
iP dt xccp ccip
t
ccp
0
) (

t
t
t
cashcrops
t t
eccdsb iP dt xccp ccip -
|
|
.
|
\
|
+ =
}
0
) (

sccp
t t
ccdsb eccdsb ) ( =

t
t
t
ccs
ccd
ccdsb =

]
) (
ln[
0
) (
ccrP
iP dt xccp
ccde
t t t
t
t
cashcrops
t
e ccxig cctld ccd
}
- + =
+
-

]
) (
ln[
0
) (
ccrP
iP dt xccp
ccse
t t
t
t
cashcrops
t
e ccpro ccs
}
- =
+
-

20
where
=
cashcrops
t
P
Equilibrium Price of Cash Crops
xccp
t
= Change in Cash Crops Price
iP
cashcrops
=Initial Value of Cash Crops
ccip
t
= Cash Crops Indicated Price
eccdsb
t
= Effect of Cash Crops Demand/Supply Balance on Price
sccp= Sensitivity of Cash crops Price to Demand/Supply Balance=1
ccdsb
t
= Cash Crops Demand/Supply Balance
ccd
t
= Demand of Cash Crops
ccs
t
= Supply of Cash Crops
ccrP= Reference Cash Crops Price= 306507(Rial)
ccde= Cash Crops Demand Elasticity= -1
ccse= Cash Crops Supply Elasticity= 1
cctld
t
= Total Local Demand of Cash Crops
ccxig
t
= Export/Import Gap of Cash Crops
ccpro
t
= Production of Cash Crops
ccprov
t
= Value of Cash Crops Production
ccproy
t
= Productivity of Cash Crops Area

Where
NAE=Net of Agriculture Export
EIGC=Export/Import Gap of Crops
EIGCC=Export/Import Gap of Cash Crops
tldcc=Total Local Demand of Cash Crops
ccdmi= Demand of Cash Crops for Manufacturing Input
ccnid= Normal Individual Demand of Cash Crops
= Normal Consumpiton Rate of Cash Crops Per Capita
Table (2-5) Result of Initial Simulation of Agriculture View
Time (Year)Net Agriculture Export
(RIAL)
Net
Export
RIAL

1990 -1.94018e+007
2.2379e+009
1991 -2.04054e+007
4.14423e+009
1992 -2.01108e+007
5.14581e+009
1993 -2.04203e+007
1.00906e+010
1994 -2.12863e+007
2.16939e+010
Total Value of Agriculture
Production
RIAL

2.16339e+010
2.91099e+010
7.03195e+010
8.31123e+010
1.08991e+011
1.77486e+011
2.34333e+011
2.77576e+011
3.60331e+011
4.28393e+011

21
1995 -2.14961e+007
4.52395e+010
1996 -2.21679e+007
7.39684e+010
1997 -2.26645e+007
7.30805e+010
1998 -2.26415e+007
5.40093e+010
1999 -2.31264e+007
9.076e+010
2000 -2.37045e+007
1.7315e+011
2001 -2.42576e+007
1.43496e+011
2002 -2.51117e+007
1.47531e+011
2003 -2.61757e+007
1.7487e+011
2004 -2.73935e+007
2.20713e+011
2005 -2.83187e+007
3.24606e+011
2006 -2.94818e+007
2.96436e+012
2007 -3.02914e+007
3.4914e+012
2008 -3.09195e+007
3.88253e+012
2009 -3.18942e+007
4.18743e+012
2010 -3.26233e+007
3.99843e+013
2011 -3.37325e+007
8.70036e+013
2012 -3.44854e+007
1.0944e+014
2013 -3.56428e+007
1.20278e+014
2014 -3.65247e+007
1.23263e+014
2015 -3.7741e+007 5.19911e+013

2016 -3.87025e+007
4.23378e+013
2017 -3.99895e+007
3.82528e+013
2018 -4.09928e+007
3.49218e+013
2019 -4.23264e+007
3.19342e+013
4.7331e+011
5.59893e+011
6.0323e+011
6.94967e+011
8.09341e+011
9.48176e+011
1.14606e+012
1.07753e+012
1.23264e+012
1.12117e+012
1.27549e+012
1.15159e+012
1.32298e+012
1.19112e+012
1.34664e+012
1.20784e+012
1.34811e+012
1.20163e+012
1.35617e+012
1.21087e+012
1.36556e+012

22
2020 -4.33915e+007
2.92206e+013

Figure(7-5) Total Investment in Oil Sector and Total Value of Oil Export
4e+012 Rial/Year
2e+014 Rial/Year
3e+012 Rial/Year
1.5e+014 Rial/Year
2e+012 Rial/Year
1e+014 Rial/Year
1e+012 Rial/Year
5e+013 Rial/Year
0 Rial/Year
0 Rial/Year
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Time (Year)
Total Investment in Oil Sector : Initial simulation Rial/Year
Total Value of Oil Export : Initial Simulation Rial/Year
Figure (6-5) Expectation Oil Reserve and Production Rate of Curd Oil (1990-2020)
80 B Barrel
40 B Barrel/Year
55 B Barrel
30 B Barrel/Year
30 B Barrel
20 B Barrel/Year
5 B Barrel
10 B Barrel/Year
-20 B Barrel
0 Barrel/Year
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Time (Year)
Expectation of Oil Reserve: Initial simulation Barrel
Production Rate of Curd Oil: Initial simulation Barrel/Year

23

}
+ =
t
t
t t
iEOR dt prco EOR
0
) (
, EOR>=0
0 : 0 , 0 : s > =
c
c
EOR EOR prco
t
EOR
t
2 : , 1 : ) ( ) (
2 2 1 1
T t T t t t prco
t
e N - u e N - u =

) (
2 t
TIOS I = u

) (
2 t
TIOS O = N

) (
1 t
TINV TIOS - =

lbarrel t t
P prco copv
$
- =

2 , 1 ) (
$ $ $
T t P T t t P P
lbarrel lbarrel lbarrel
e e =
-

) (
2 t t
copv invop - =

t t t
invop copv ncopv =

) (
3 t t
ncopv gscop - =

t t
ncopv csop - = ) 1 (
3

Figure (8-5) Selected Variables
400 B Ton
800,00T Ton/Year
40 B Ton/Year
40 M Ton
40 B Ton/Year
200 B ton
400,000 Ton/Year
20 B Ton/Year
30 M Ton
20 B Ton/Year
0 Ton
0 Ton/Year
0 Ton/Year
20 M Ton
0 Ton/Year
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Time (Year)
"Expectation of Natural Gas Reserve." : Initial Simulation Ton
Production Rate of Gas: Initial Simulation Ton/Year
Production Rate of Natural Gas: Initial Simulation Ton/Year
Reserve of LPG: Initial Simulation Ton
Total Production of Gas : Initial Simulation Ton/Year

24
) (
4 t t
gscop tlcco - =

( )
$ 4
] ) 1 [(
YRl t t t
xP csop tlcco xco - + - =

$ YRl t t
xP tlcco tlcco - =
-

2 , 1 ) (
$ $ $
T t xP T t t xP xP
YRl YRl YRl
e e =
-

Gas Production
}
+ =
t
t
t t
iRLPG dt gpr RLPG
0
) (

0 : 0 , 0 : s > =
c
c
RLPG RLPG gpr
t
RLPG
t
2 , 1 ) ( T t gpr T t t gpr gpr
t t t
e e =
-

- N =
-
2 t
gpr

t t
dprg dprg + - =
-
) (

3 , 3 0 T t fidgp T t dprg
t t
e e =

2 3 0 , 2 ) 1 ( , 3 ) 2 (
1 2
orT T t T t TIGS T t TIGS fidgp
t
e e A e A =

t t
TIOS TIGS = 2

) ( 1
5 t t
TINV TIGS - =

iENGP dt ngpr ENGR
t
t
t t
+ =
}
) (
0

t t
ENGR dprng
t
ENGR
- =
c
c

3 0 , 3 T t T t fidgp dprng
t t
e e =

3 ) ( , 3 ) ( T t dprg T t dprng dprg TPG
t t t t
e e + =

t t t
gP TPG TPGV - =

2 , 1 ) ( T t gP T t t gP gP
t T t
e e =
-

) (
6 t t t
TPGV TPGV NTPGV - =

2 ) ( , 1 ) (
7
T t NTPGV T t t lcgp lcgp
t t t
e - e =

t t t
lcgp NTPGV xgp =

25
Where
EOR
t
= Expectation of Oil Reserve
prco
t
= Production Rate of Curd Oil
= Productivity Mean Per Sector
N= Number of Oil Sector
TIOS= Total Investment in Oil Sector
TINV= Total Domestic Investment
cpov= Value of Curd Oil Production
P
$lbarrel
= Price Per Barrel
Inovp= Input Value of Curd Oil Production
gscop= Government Share of Curd Oil Production
ncopv= Net Value of Curd Oil $
csop= Companies Share
tlcco= Total Local Consumption of Oil
xco= Value of Oil Export YR
xP
YR/$
= Exchange Price
1
= Investment Rate for Oil Sector
2
= Input Rate of OiL
3
= Government Share Rate
4
= Local Consumption Rate of Oil
RLPG= Reserve of LPG
Gpr= Production Rate of Gas
= Productivity of LPG Per Oil Sector
dprg= Development Production Rate of LPG
fidgp= Fraction Investment Which Allocated to Development Gas Production
TIGS= Total Investment in Gas Sector
ENGR= Expectation of Natural Gas Reserve
ngpr= Production Rate of Natural Gas
dprng= Development Production Rate of Natural Gas
TPG= Total Production of Gas
TPGV= Value of Gas Production
gP
t
= Price of Gas YR Per Ton
NTPGV= Net Value of Gas Production
lcpg= Value of Local Consumption of GasYR
xgP= Value of Gas Export YR
5
= Total Investment in Gas Sector
6
= Input Rate From Gas Production
7
= Local Consumption Rate of Gas

Table (3-5) Result of Initial Simulation of Oil View
Time (Year)
EOR(Barrel)
1990 7.9e+010
1991 7.89319e+010
1992 7.88573e+010
1993 7.87931e+010
1994 7.87152e+010
1995 7.85938e+010
1996 7.847e+010
Prco`(Barrel/
Year)
6.81044e+007
7.45916e+007
6.42028e+007
7.78794e+007
1.21451e+008
1.23724e+008
1.24505e+008
P
$lbar
rel

12
12.5
14
15.8
15.2
16.9
4
xP
YR/$

13.92
22.12
28.5
39.54
55.24
100
129.2
8
Xco(Rial/Y
rar)
5.53803e+
009
1.00403e+
010
1.24706e+
010
2.36279e+
TIOS(Rial/Y
ear)
2.60546e+0
08
1.98629e+0
09
2.54047e+0
09
3.82768e+0

26
1997 7.83455e+010
1998 7.8215e+010
1999 7.80821e+010
2000 7.79409e+010
2001 7.77836e+010
2002 7.76258e+010
2003 7.7468e+010
2004 7.73129e+010
2005 7.71604e+010
2006 7.70104e+010
2007 7.57538e+010
2008 7.42743e+010
2009 7.26294e+010
2010 7.08554e+010
2011 6.8993e+010
2012 6.03058e+010
2013 4.14277e+010
2014 1.65154e+010
2015 -1.1564e+010
2016 - 1.1564e+010
2017 -1.1564e+010
2018 - 1.1564e+010
2019 - 1.1564e+010
2020 - 1.1564e+010
1.30495e+008
1.32919e+008
1.41274e+008
1.5722e+008
1.5786e+008
1.57738e+008
1.55114e+008
1.52532e+008
1.49996e+008
1.25658e+009
1.47951e+009
1.64495e+009
1.77391e+009
1.86244e+009
8.68719e+009
1.88781e+010
2.49123e+010
2.80795e+010
0
0
0
0
0
0
20.3
8
18.4
4
14.9
4
18.6
7
27.3
9
24.5
8
27.9
5
36.6
51.5
19
51
51
51
51
51
51
51
51
51
51
51
51
51
51
51
135.8
8
55.75
161.7
3
168.6
3
176
183
184
191.4
2
196
196
196
196
196
196
196
196
196
196
196
196
196
196
196
196
010
4.95075e+
010
1.01574e+
011
1.55079e+
011
1.46954e+
011
1.32229e+
011
1.97159e+
011
3.25523e+
011
2.89751e+
011
3.29272e+
011
3.80204e+
011
4.98408e+
011
7.14196e+
011
5.98548e+
012
7.04735e+
012
7.83538e+
012
8.44966e+
012
8.87135e+
012
4.13796e+
013
8.9922e+0
13
1.18664e+
014
1.33751e+
014
0
0
0
0
0
0
09
2.55817e+0
09
4.52344e+0
09
6.05391e+0
09
9.30471e+0
09
1.44657e+0
10
1.43759e+0
10
1.36501e+0
10
1.91628e+0
10
2.14978e+0
10
2.62739e+0
10
3.34398e+0
10
3.28783e+0
10
3.97449e+0
10
1.22027e+0
11
1.41639e+0
11
1.56685e+0
11
1.66897e+0
11
9.27616e+0
11
2.11075e+0
12
2.87182e+0
12
3.27128e+0
12
3.42601e+0
12
1.24067e+0
12
9.71542e+0
11
8.76873e+0

27
11
8.05739e+0
11
7.40354e+0
11

Table (4-5) Result of Initial Simulation of Gas View
Time (Year)
RLPG(Ton)
1990 3.1e+007
1991 3.09926e+007
1992 3.09408e+007
1993 3.08516e+007
1994 3.06545e+007
1995 3.04217e+007
1996 3.01605e+007
1997 2.98805e+007
1998 2.95562e+007
1999 2.92068e+007
2000 2.87936e+007
2001 2.83308e+007
2002 2.78227e+007
2003 2.72277e+007
2004 2.66029e+007
2005 2.61229e+007
2006 2.56229e+007
2007 2.52911e+007
2008 2.49447e+007
2009 2.45948e+007
2010 2.42422e+007
2011 2.392e+007
2012 2.356e+007
2013 2.32e+007
2014 2.284e+007
2015 2.248e+007
2016 2.212e+007
2017 2.176e+007
2018 2.14e+007
2019 2.104e+007
2020 2.068e+007
Gpr(Ton/Y
ear)
7433
51771
89200
197069
232815
261178
280080
324270
349383
413220
462783
508109
595025
624813
480000
500000
331738
346416
349914
352598
322199
360000
360000
360000
360000
360000
360000
360000
360000
360000
360000

ENGR(Ton
)
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
011
2.54873e+
Ngpr(Ton/Y
ear)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1.07555e+0
10
2.00894e+0
10
1.95885e+0
10
1.85522e+0
10
1.71915e+0
10
1.57151e+0
10
1.27976e+0
10
1.1563e+01
0
1.05563e+0
10
9.65335e+0
09
8.83324e+0
xgP(YR/Ye
ar)
0
0
0
0
0
190848
2.27738e+
006
1.94048e+
006
4.15683e+
006
2.53082e+
006
3.83465e+
007
1.81089e+
007
5.73261e+
007
0
5.92416e+
008
6.1908e+0
08
1.09766e+
009
1.14622e+
009
1.1578e+0
09
1.16668e+
009
3.55888e+
013
6.64729e+
013
6.48158e+
013
6.13869e+
013
TVGOE(YR/Ye
ar)
2.46647e+009
4.47161e+009
5.554e+009
1.06582e+010
2.23687e+010
4.63149e+010
7.67816e+010
7.60459e+010
5.68364e+010
9.44774e+010
1.76925e+011
1.4928e+011
1.53601e+011
1.83555e+011
2.26461e+011
3.32642e+011
2.97198e+012
3.49909e+012
3.89024e+012
4.19514e+012
3.99921e+013
8.70116e+013
1.09448e+014
1.20286e+014
1.23272e+014
5.19993e+013
4.23458e+013
3.82607e+013
3.49297e+013
3.19422e+013
2.92286e+013

28
011
2.44117e+
011
2.24028e+
011
2.04439e+
011
1.85887e+
011
1.68695e+
011
1.5298e+0
11
1.40183e+
011
1.2862e+0
11
1.18064e+
011
1.0841e+0
11
09 5.68845e+
013
5.19993e+
013
4.23458e+
013
3.82607e+
013
3.49297e+
013
3.19422e+
013
2.92286e+
013

Figure (9-5) Mine Result of Initial simulation of GDP View
6e+014 YR/Year
600 B YR/Year
2e+013 YR/Year
2e+014 YR/Year
4e+014 YR/Year
8e+013 YR/Year
3e+014 YR/Year
300 B YR/Year
1e+013 YR/Year
1e+014 YR/Year
2e+014 YR/Year
4e+013 YR/Year
0 YR/Year
0 YR/Year
0 YR/Year
0 YR/Year
0 YR/Year
0 YR/Year
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Time (Year)
Aggregate Demand: Initial simulation YR/Year
Current Transfers and Current Subsidies: Initial simulation YR/Year
Government expenditure: Initial simulation YR/Year
Net Export: Initial simulation YR/Year
Privet Consumption: Initial simulation YR/Year
Total Domestic Investment: Initial simulation YR/Year

29

t t t t t
NE TINV GE PC Y + + + =

t PC t
C PC - =

t c t
CDI C - =

t t t
NIT GDP CDI =

t t t t t t
IBS CDU PNPSF PGS IND GDP + + + =

t t t
gt ITR NIT =

2 ) ( , 1 ) ( T t GDP f T t t ITR ITR
t t t
e e =

t subsidy t
CGTS gt - =

t t t t t
GOSE CAD CGTS PWS GE + + + =

12 - - =
t PS t
PEM PWS

2 ) ( ( , 1 ) ( T t t T t t CGTS CGTS
CGTS CGTS t t
e + e =

ALC
t
t
CA
CAD

=

}
+ =
t
t
t t t
iCA dt CAD CAI CA
0
) (

Figure(10-5) Main Results for Initial Simulation of GDP View
6e+014 YR
4e+012 YR
10 M Person
8e+013 YR
0 YR
0 YR
0 Person
0 YR
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
Capital: Initial Simulation YR
DEBT: Initial Simulation YR
Employment: Initial Simulation Person
Total Saving: Initial Simulation YR

30
t t
t
CAD CAI
t
CA
=
c
c

) , 0 max(
t t t
NLRW TINV CAI + =

t t t
DC RA NLRW + =

2 )] ( [ , 1 ) ( T t t T t t RA RA
RA RA t t
e + e =

2 )] ) ( , 0 [max( , 1 ) ( T t edodl
tal
DL
T t t DC DC
t
t t
e - e =

t t t
FINV INFS TINV + =

t INV t
TS INFS - =

}
+ =
t
t
t t t
iTS dt INFS SR TS
0
) (

t t
t
INFS SR
t
TS
=
c
c

t C t
CDI SR - = ) 1 (

t t t t
NMPE NOGE NAE NE + + =

}
+ =
t
t
t t t
iDEBT dt LP NGD DEBT
0
) (

t t
t
LP NGD
t
DEBT
=
c
c

0 0 , 0 ) ( > s = NGDR NGDR NGDR NGD
t t

t t t
GE GR NGDR =

mp
DEBT
LP
t
t
=

iEMP dt EMPR EMP
t
t
t t
+ =
}
0

t
EMPR
t
EMP
=
c
c

t t EMP t
EMP LF EMPR - = ) (

31
LF t t t
LF - + = ) (
3 2

t
t
t
CDI
capita INC
= /

Where
Y
t
= Aggregate Demand
PC
t
=Privet Consumption
GE
t
=Government expenditure
NE
t
=Net Export
C
t
=Consumption
CDI
t
=Current Disposable Income
GDP
t
=GDP at Market Price
NIT
t
="Indirect Taxes (net)"
IND
t
=Industries
PGS
t
=Producers of Government Services
PNPSF
t
=Producers of Non Profit Bodies Serving Families
CDU
t
=Custom Duties
IBS
t
=Imputed Bank Services
ITR
t
=Indirect Tax Revenue
gt
t
=Government Transfer
CGTS
t
=Current Transfers and Current Subsidies
PWS
t
=Wages and Salary for Public Sector
CAD
t
=Capital Depreciation
GOSE
t
=Goods and Service Expenditures
PEM
t
=Employment for Public Sector
PS
=Monthly Average Wages for Public Sector
CA
t
=Capital
ALC
= Average Life of Capital
CAI
t
= Capital Investment
NLRW
t
= Net Lending to the Rest of The World
RA
t
= Reserve Assets
DC
t
= Debt Commitment
INFS
t
= Investment from Savings
FINV
t
= Foreign Investment
TS
t
= Total Saving
SR
t
= Saving Rate
NAE
t
= Net Agriculture Export
NOGE
t
= TOTAL VALUE OF GAS AND OIL EXPORT
NMPE
t
= NET EXPORT VALUE OF MANUFACTURING PRODUCTION
NGD
t
= Net Government Deficit
LP
t
= Loan Payment
NGDR
t
= Net Government Deficit Rate
GR
t
= Government Revenue
mp= Maturity Period
EMP
t
= Employment
EMPR
t
= Employment Rate
LF
t
= Labor Force
INC/capita= Income per Capita YR

32

Table (5-5) Result of Initial Simulation of GDP View
Time Aggregate
Demand
1990 3.0009e+011
1991 3.6756e+011
1992 4.45684e+011
1993 5.43537e+011
1994 6.27211e+011
1995 8.78244e+011
1996 1.30038e+012
1997 1.55029e+012
1998 1.63388e+012
1999 1.81191e+012
2000 2.41194e+012
2001 2.60801e+012
2002 2.9382e+012
2003 3.53611e+012
2004 4.06942e+012
2005 5.13349e+012
2006 1.40932e+013
2007 1.77445e+013
2008 1.98585e+013
2009 2.14376e+013
2010 1.17981e+014
2011 2.73017e+014
2012 3.78731e+014
2013 4.37945e+014
2014 4.64133e+014
2015 2.26239e+014
2016 1.59128e+014
2017 1.43375e+014
2018 1.33037e+014
2019 1.23783e+014
2020 1.15453e+014
Privet
Consumpt
ion
6.31772e+
010
9.13468e+
010
1.40541e+
011
1.91286e+
011
2.66944e+
011
4.42896e+
011
6.77097e+
011
7.54505e+
011
7.96232e+
011
9.91471e+
011
1.27701e+
012
1.47037e+
012
1.6446e+0
12
1.97873e+
012
2.18949e+
012
2.82304e+
012
9.24321e+
012
1.05776e+
013
1.17025e+
013
1.2455e+0
13
7.2769e+0
13
1.64769e+
014
2.22249e+
Governme
nt
expndture
2.27189e+
011
2.29232e+
011
2.45032e+
011
2.60201e+
011
2.80429e+
011
2.92828e+
011
3.72805e+
011
4.38132e+
011
4.25714e+
011
4.10632e+
011
5.47194e+
011
5.20295e+
011
5.85073e+
011
6.71092e+
011
7.54496e+
011
9.43311e+
011
8.36819e+
011
9.61952e+
011
1.14844e+
012
1.35005e+
012
1.55944e+
012
2.34246e+
012
4.45797e+
Total
Domestic
Investment
5.21092e+
009
3.97258e+
010
5.08094e+
010
7.65536e+
010
5.11634e+
010
9.04688e+
010
1.21078e+
011
1.86094e+
011
2.89313e+
011
2.87519e+
011
2.73002e+
011
3.83256e+
011
4.29956e+
011
5.25478e+
011
6.68795e+
011
6.57565e+
011
7.94899e+
011
2.44053e+
012
2.83278e+
012
3.1337e+0
12
3.33793e+
012
1.85523e+
013
4.22151e+
Current
Transfers
and Current
Subsidies
2.27447e+009
3.11144e+009
4.15672e+009
5.40557e+009
6.98038e+009
6.8107e+009
5.5432e+010
9.8475e+010
6.8609e+010
3.1527e+010
1.41579e+011
9.0597e+010
1.3104e+011
1.8594e+011
2.3592e+011
3.84967e+011
2.53885e+011
2.73083e+011
2.9228e+011
3.11477e+011
3.30679e+011
3.49876e+011
3.69074e+011
3.88271e+011
4.07468e+011
4.26666e+011
4.45863e+011
4.6506e+011
4.84258e+011
5.03455e+011
5.22652e+011
Net Export

2.2379e+009
4.14423e+009
5.14581e+009
1.00906e+010
2.16939e+010
4.52395e+010
7.39684e+010
7.30805e+010
5.40093e+010
9.076e+010
1.7315e+011
1.43496e+011
1.47531e+011
1.7487e+011
2.20713e+011
3.24606e+011
2.96436e+012
3.4914e+012
3.88253e+012
4.18743e+012
3.99843e+013
8.70036e+013
1.0944e+014
1.20278e+014
1.23263e+014
5.19911e+013
4.23378e+013
3.82528e+013
3.49218e+013
3.19342e+013
2.92206e+013

33
014
2.52067e+
014
2.63348e+
014
8.95515e+
013
7.35082e+
013
6.66321e+
013
6.11979e+
013
5.61623e+
013
5.17627e+
013
012
7.7755e+0
12
1.1688e+0
13
1.57494e+
013
1.80227e+
013
1.85945e+
013
1.88955e+
013
1.90684e+
013
1.91395e+
013
013
5.74364e+
013
6.54257e+
013
6.85202e+
013
2.48134e+
013
1.94308e+
013
1.75375e+
013
1.61148e+
013
1.48071e+
013

34

Table (6-5)Result of Initial Simulation of GDP View
Time(Year) Total
Saving(YR)
1990 1.0136e+010
1991 1.80008e+010
1992 2.37554e+010
1993 3.65486e+010
1994 4.97454e+010
1995 6.94208e+010
1996 1.15178e+011
1997 1.85874e+011
1998 1.97515e+011
1999 2.07066e+011
2000 2.57839e+011
2001 3.84954e+011
2002 3.97777e+011
2003 4.2769e+011
2004 5.14584e+011
2005 5.69393e+011
2006 7.34151e+011
2007 2.42634e+012
2008 2.82538e+012
2009 3.1302e+012
2010 3.33526e+012
2011 1.90267e+013
2012 4.34345e+013
2013 5.9133e+013
2014 6.73701e+013
2015 7.05572e+013
2016 2.54581e+013
2017 1.98992e+013
2018 1.79401e+013
2019 1.64666e+013
2020 1.51118e+013
Employment(Pe
rson)
3.69047e+006
3.69047e+006
3.89675e+006
4.09786e+006
4.29476e+006
4.48832e+006
4.67931e+006
4.86844e+006
5.05631e+006
5.24351e+006
5.43052e+006
5.61782e+006
5.80582e+006
5.99491e+006
6.18546e+006
6.37779e+006
6.57222e+006
6.76902e+006
6.96849e+006
7.17087e+006
7.37641e+006
7.58536e+006
7.79793e+006
8.01435e+006
8.23483e+006
8.45958e+006
8.68881e+006
8.92271e+006
9.16149e+006
9.40535e+006
9.65447e+006
Capit(YR)
1.5074e+010
1.82613e+010
5.4199e+010
1.09031e+011
1.85436e+011
2.28669e+011
2.86642e+011
3.23128e+011
4.53282e+011
7.83599e+011
9.94153e+011
9.89424e+011
1.21999e+012
1.52153e+012
1.95223e+012
2.47372e+012
2.9438e+012
5.58025e+012
1.00525e+013
1.49734e+013
2.01216e+013
4.24728e+013
1.04792e+014
2.03165e+014
3.19381e+014
4.40055e+014
5.07078e+014
5.23048e+014
5.30885e+014
5.34869e+014
5.35791e+014
DEBT(YR)
5e+007
2.02294e+011
3.97682e+011
6.10961e+011
8.30743e+011
1.05744e+012
1.22907e+012
1.41747e+012
1.67709e+012
1.95331e+012
2.13841e+012
2.35892e+012
2.585e+012
2.86763e+012
3.17151e+012
3.47837e+012
3.74277e+012
3.61801e+012
3.49741e+012
3.38083e+012
3.26813e+012
3.1592e+012
3.05389e+012
2.95209e+012
2.85369e+012
2.75857e+012
2.66661e+012
2.57773e+012
2.4918e+012
2.40874e+012
2.32845e+012

5.Discussion
In a complex system we cannot compute every effect and behavior of variables on
model. The mathematical approaches to the study of dynamical systems are existed
since the days of Newton and Leibniz (Peter Turchin,2005). The most common and
incredibly fruitful mathematical tool is the differential equation, which looks like this:
X'= f(X)
where X is a variable describing some aspect of the system. On the left hand side we
see X with a dot on top, which denotes the derivative, or rate of change of X. To the
right of the equals sign, f(X) means some function of X. For example, if f(X)=rX, then
we have an exponential model: X'=rX, which assumes that the rate of change of the
variable X is directly proportional to the value of the variable X. Even a third order,
linear differential equation is unsolvable by inspection. Important situations in
management, economics, medicine, and social behavior usually lose reality if

35
simplified to less than fifth-order nonlinear dynamic systems. Often the model
representation must be twentieth order or higher.
The previous model represents the actual system behavior as it is observed in real
life. It should be decrease the random error because we can put every variables which
we think in the model and we can test every change in it. Values and Parameter values
are drawn from all available sources, not merely from statistical analysis of time
series. Regression modeling is usually a cross-sectional view of the relationship
among variables at a single point in time. The numbers of cases included in a sample
provide the variation to construct the parameter estimates. In contrast, simulation
modeling (System Dynamics model) is a longitudinal analysis of the variables and
their relationship over time. Thus, time is a primary variable as is the effect that
variables have on each other. The difference is largely between a cross-sectional and a
longitudinal analysis. The methods overlap when time is used as a variable in the
regression equation that leads to time-series analysis. The purpose of the two methods
is still different, however. The emphasis in regression analysis (linear or non-linear) is
to estimate the regression coefficients as indicators of the structure of a system; the
emphasis in simulation analysis (System Dynamics) is to use those coefficients in
extrapolating the value of variables over time.
Let's take GDP value to comparing between System Dynamics model and linear
regression model.
Table (6-1) GDP (Million Rial) at 1990-2005(CSO,2005)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
126489 150986 192047 238332 306404 511058 736385 888808 849321 1132619 1538636

1076049

1878007

2160608

2563490

3208501

1990 1995 2000 2005
TIME
1000000000000
2000000000000
3000000000000
G
D
P

The above graph shows real historical data of GDP.
We can estimate the parameters from linear function as follow:
Y= + X
Where and are constant. The kind of relationship between independent and
dependent variables is taken from economic theory. The simple regression model in
which time is independent variable and GDP is dependent variable, the estimated
value of parameters is

36
= -368083522.87 = 184821.46
GDP
T
=-368083522.87 + 184821.46 (Time) +
(-10.28) (10.31)
Where is error term
R= 0.94 DW= 0.82
That is meaning the time variable determining 94% for the change average of GDP.
It underestimate the true variance.
the t values look too good
will reject H
0
when it is true
So estimates will be unbiased but inefficient (not least variance).
Statistically this model have autocorrelation problem. Time is often a parameter of the
equation because we hope to use the model to forecast a value for a certain time
period, but time cannot stand alone as the economic independent variable.
The below graph show the prediction value for GDP through 2005-2020 period

2008 2012 2016 2020
TIME
3000000.00
3500000.00
4000000.00
4500000.00
5000000.00
G
D
P

Normal P-P Plot of Regression Standardized Residual
Dependent Variable: GDP
Observed Cum Prob
1.00 .75 .50 .25 0.00
E
x
p
e
c
t
e
d

C
u
m

P
r
o
b
1.00
.75
.50
.25
0.00

Economic theory was telling us about GDP function as follow:
GDP = Consumption + Government expenditure + Investment + Net export
Table (6-2) GDP Component through 1990-2005
Year GDP CONS INVES GEXP NEXP
1990 126489 93298 18046 22115 -7330
1991 150986 130802 24334 28800 -32950

37
1992 192047 154274 43026 37187 -42440
1993 238332 212810 48249 45483 -68210
1994 306404 243543 64390 57585 -59114
1995 511058 428428 112713 74017 -104100
1996 736385 483433 170879 97458 -15385
1997 888808 571757 221215 116832 -20996
1998 849321 576227 276465 124473 -127844
1999 1132619 770168 278493 156273 -72315
2000 1538636 797196 264274 194133 124209
2001 1076049 1086959 325114 236313 13715
2002 1878007 1265702 347128 279088 -13911
2003 2160608 1448769 447822 1448769 -32545
2004 2563490 1698053 519868 1698053 23672
2005 3208501 2058537 594523 2058537 162500

The above table shows real historical data of GDP and macroeconomic variables.
We can use multi regression analysis to estimate statistical parameter by using SPSS
program:
= 81460.89
1
= 0.67
2
= 1.99
3
= 0.16
4
= 1.48
R =0 .98 DW= 3.09
GDP = 81460.89 + 0.67 (CONS) + 1.99 (INVES) + 0.16(GEXP) +
(0.88) (1.50) (1.53) (1.15)
1.48 (NEXP) +
(2.00)
In this model we can't predict through time but we can do if we know any values of
independent variables. It is inflexible to change parameters estimator values; we have
insignificant estimators for all parameters. If we enter the time into the model we have
the follow equation:
= -101923864.74
1
= 0.45
2
= 0.95
3
= 0.29
4
= 1.55
5
= 51243.78
R = 0.99 DW= 3.10
GDP = -101923864.74 +0 .45(CONS) +0 .95(INVES) +0 .29(GEXP)
(-0.85) (0.85) (0.53) (1.38)
+ 1.55(NEXP) + 51243.78 (YEAR) +
(2.06) (0.85)
Where is error term

38
2008 2012 2016 2020
YEAR
103000000
104000000
105000000
106000000
G
D
P

Normal P-P Plot of Regression Standardized Residual
Dependent Variable: GDP
Observed Cum Prob
1.00 .75 .50 .25 0.00
E
x
p
e
c
t
e
d

C
u
m

P
r
o
b
1.00
.75
.50
.25
0.00

The above graphs show the predicted value of GDP and residuals through 2006-2020
periods. This model tells us about GDP increase forever and 99% of change in GDP
value depend only on five variables as function shows, but if we are in need to
understand and determine the behavior of the variables and their interactive effect, we
must make more analysis and more function with more variables.
6.System Dynamics Model Analysis
From macroeconomic system dynamic model of Yemen we can see the main
difference between System Dynamics model and other linear or non-linear models
which we can use in statistical analysis. We have more than 600 variables in our
models. The model consists of 4 kinds of variables, Level, rate, lookup and constant.
These variables relate to each other by 500 linear and non-linear equations with
statistical parameters estimator. All stock equations are integral which depend on
accumulation and all flows equation are differential. However, in this study we are
not focus on mathematical solutions but we show the theoretical properties for System
Dynamic and the main difference than regression analysis .
If we choose one of main variables, for example GDP. The relationship between
variables which affect GDP was get from model diagram that shows causal loop. We
can add any variables which we think and we can make all possible causal loop. The

39
below diagram show all real components of productive sector and the historical data
of GDP in the model.
GDP at Market Price
Custom Duties
(Time)
Custom duties Table2
(Policy Year1)
Custom duties Table1
Imputed Bank Services
(Time)
Imputed Bank Services Table2
(Policy Year1)
Imputed Bank Services Table1
Industries
Construction and Building
Electricity and water
Financing, Insurance, Real Estate and Business Services
Mininig and Quaring
Output Value of Manufacturing Production
Personal and community services
Total of Agriculture Production
Transport, Storage and Communications
Wholesale and Retail Trade, Restaurants, Hotels and Repair
Producers of Government Services
Time
Policy Year1
Producers of Government Services Table2
Producers of Government Services Table1
Producers of Non Profit Bodies Serving Families
(Time)
(Policy Year1)
Producers of Non Profit Bodies Serving Families Table2
Producers of Non Profit Bodies Serving Families Table1

Also we can take one of these components to know its components for example
agriculture sector.

40
Total of Agriculture Production
Value of Cash Crops Production
Price of Cash Crops
Production of Cash Crops
Value of Deep Fish Production
Price of Deep Fish
Production of Deep Fish
Value of Fodder Priduction
Price of Fodder
Production of Fodder
Value of Other Caches Production
Price of Other Caches
Productin of Other Caches
Value of Qat Priduction
Price of Qat
Production of Qat
Value of Surface Fish Production
Price of Surface Fish
Production of Surface Fish
Value of Veg and Fruit Priduction
Price of Veg and Fruit
Production of Veg. and Fruit
Value of Wheat and Other Creals Production
Price of Wheat and Other Creals
Production of Wheat and Other Cereals

we take one of crops and we see variables and parameters which make effect, for
example: Cash Crops.
Value of Cash Crops Production
Price of Cash Crops
Time
Price of Cash Crops Table2
Policy Year1
Price of Cash Crops Table1
Area of Cash Crops

and we take one of these variables and show all possible formula which relating to
parameters.
For example: Production of Cash Crops
Area of Cash Crops
Cash Crops Area Rate
Initial Area of Cash Crops
Time
Policy Year1
Productivity of Cash Crops Area Table2
Productivity of Cash Crops Area Table1

From production of Cash Crops diagram we take Area of Cash Crops variable.

41
Area of Cash Crops
Area of Crops
Growth Rate of Cash Crops Area
Initial Area of Cash Crops

Area of Crops
Area of Crops
(Area of Crops)
Growth Rate of Cash Crops Area
Crops Area Rate
Culivated Area
Growth Rate of Crops
Initial Crops Area
Veg and Fruit Area Rate
(Area of Crops)
Growth Rate of Veg. and Fruit Area
Wheat and Othrer Cereals Area Rate
(Area of Crops)
Growth Rate of Wheat and Cereals Area

Cultivated Area
Culivated Area
Crops Area Rate
(Culivated Area)
Growth Rate of Crops
Culivated Rate
Culiivable Area
Growth Rate of Culivated Area
Fodder Area Rate
(Culivated Area)
Growth Rate of Fodder Area
Initial Culivated Area
Qat Area Rate
(Culivated Area)
Growth Rate of Qat Area

Cultivable Area

42
Culiivable Area
Culivated Rate
(Culiivable Area)
Initial Culivable

Cultivated Rate
Culivated Rate
Culiivable Area
(Culivated Rate)
Initial Culivable
Time
Growth Rate of Culivated Area Table2
Policy Year1

Growth Rate of Cultivated Area

Time INITIAL TIME
Effect of Growth In Cereals Area
Fraction of Investment Allocated to Development the Culivaed area
Policy Year1

Fraction Investment Allocated to Development the Cultivated Area

43
Fraction of Investment Allocated to Development the Culivaed area
Investment Rate Allocated to Development culivated area
Total Investment in Agricultures Sector
Investment rate for agriculiture sector
Total Domestic Investment
Fraction of Investment Allocated to Development the Culivaed area Table2


Foriegn Investment
Time
Foriegn Investment Table2
Policy Year1
Foriegn Investment Table1
Investment from Savings
Total Saving
Investment Fraction

Investment From Saving

Total Saving
(Investment from Savings)
Saving Rate
Investment Fraction
Time
Investment Fraction Table2
Policy Year1
Investment Fraction Table1

Total Saving

44
Total Saving
(Total Saving)
Investment Fraction
Saving Rate
Average Proponsity to Save
Current Disposable Income


GDP at Market Price
Custom Duties
Imputed Bank Services
Industries
Producers of Government Services
Producers of Non Profit Bodies Serving Families
Indirect Taxes (net)
Government Transfer
Undirect Tax Revenue

All of previous diagram lead us to beginning step, so more loops we can follow in
same way.
In our model the GDP chart presents the historical data and prediction value through
1990-2020 periods.

in above chart we note increase in GDP value until 2014 then beginning to decrease
because production value in Yemen depends on oil production and oil production
depends on Production Rate of Cured Oil that depends on Expectation of Oil Reserve,
this causality relationship is not exist in regression analysis as we see in the three
Figure (6- 1)GDP at Market Price , historical and predicted value (1990-2020)
6e+014
4.5e+014
3e+014
1.5e+014
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Time (Year)
rial/Year
GDP at Market Price : Initial simulation1

45
regression models. So system dynamic is more realistic than regression model and
holistic.
7.Sensitivity Analysis
Sensitivity analysis is used to determine how sensitive a model is changed
according to the change of the parameters value within the model and the changes in
the structure of the model. Sensitivity tests help us to understand dynamics of a
system. Experimenting with a wide range of values can offer insights into behavior of
a system in extreme situations. Discovering that the system behavior greatly changes
for a change in a parameter value can identify a leverage point in the model, a
parameter whose specific value can significantly influence the behavior mode of the
system. in this analysis we focus on parameter sensitivity. we depend on historical
data which compute from statistical books. We try to determine economics variables
and behavior of the production sector in the future under follows realties
1- our model is open model, we can add many of variables.
2- we assume the data is true.
3- we focus on main productive sectors only as agriculture and oil sector.
4- we use OLS method to estimate unknown parameters in all subsystem in the
model.
5- we use computer program simulation (VENSIM PLE) which used monte-carlo
simulation method.
The model is described macroeconomic of Yemen as we thought. In initial state of the
model we can see the growth in agriculture sector is limited because the cultivable
Area will be decreased and also oil sector,which all production value depend on it,
will decrease. It will be ended after many years. So we are in need to discover other
sources or develop the source which existent. System Dynamic provide many
Scenarios to solve problem and give us many choices to make decision.
In our model, we can see
1- Total Fertility is very high
2- Cultivable Area is limited
3- Consumption of agriculture production is very high
4- Growth in fishing sector is very low
5- Trading balance is negative
6- Most income is oil production income
7- Oil production per year is decrease and Expectation of Oil Reserve is limited
8- Government expenditure is very high
9- DEBT is very high
10- Domestic investment is very low
In this section we look at model and explore how sensitive it is to changes in
parameters and initial values of stocks.
Let's now look at the behavior of the system when started in equilibrium. We can't
choose all variables in the model because they are many, but we focus on main
variables to explain behavior of the system.
First Scenario
Let's assume that the Total Fertility change to 5 child/wn and 6.5 child/wn another
way at time 1 year. Below Figures show the resulting behavior of the variables which
affect parameters.

46

A change in "Total Fertility" creates a simultaneous change in the initial number of
population, where "Total Fertility" is low, births rate is low. The result is a number of
population in curve 3 growth lower than a number of population in curve 2 and 1.

When we divide income to population, income per capita is increase.
Graph of Response to Changes in Total Fertility

20 M
15 M
10 M
5 M
0
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
R
i
a
l
/
P
e
r
s
o
n

Income per Capita YR :Total Fertility 5.8 (child/wn)
Income per Capita YR : Total Fertility 6.5 (child/wn)
Income per Capita YR : Total Fertility 5 child/wn)

Rial/person
Rial/person
Rial/person
Figure (6-3): The effect of changes in Total Fertility


40 M
30 M
20 M
10 M
0
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
Person
person
person
person
Population : Total Fertility 5.8 (child/wn)

Population : Total Fertility 6.5 (child/wn)

Population : Total Fertility 5 (child/wn)

Figure (6-2): The effect f changes in Total Fertility

Figure (6-2): The effect f changes in Total Fertility

47

low number of population, a result is low number of employment.

low number in employment, cause low number employment in public sector so low
value of government expenditure lead to low debt.

4e+012
3e+012
2e+012
1e+012
0
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
R
i
a
l

DEBT : Total Fertility 5.8 (child/wn)
DEBT : Total Fertility 6.5 (child/wn)
DEBT : Total Fertility 5 (child/wn)
Rial
Rial
Rial


20 M
15 M
10 M
5 M
0
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
P
e
r
s
o
n

Employment : Total Fertility 5.8 (child/wn)
Employment : Total Fertility 6.5 (child/wn)
Employment : Total Fertility 5 (child/wn)
perso
n
perso
n
perso
n
Figure (6-4): The effect of changes in Total
Fertility

48

low population, result low local consumption of agriculture production so export
value of agriculture production will be increased during the time. Although the three
curves do not look exactly the same, these parameter changes do not affect the general
mode of behavior of the system. All three curves show a small decrease and increase
in the variables right after the step increase or decrease.


6e+014
4.5e+014
3e+014
1.5e+014
0
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
R
i
a
l
/
Y
e
a
r

GDP at Market Price : Total Fertility 5.8 (child/wn)
GDP at Market Price : Total Fertility 6.5 (child/wn)
GDP at Market Price : Total Fertility 5 (child/wn)

Rial/year
Rial/year
Rial/year

0
-15 M
-30 M
-45 M
-60 M
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
R
i
a
l
/
Y
e
a
r

Net Agriculture Export : Total Fertility 5.8
(child/wn)
Net Agriculture Export : Total Fertility 6.5
(child/wn)
Net Agriculture Export : Total Fertility 5
(child/wn)
Rial/yea
r
Rial/yea
r
Rial/yea
r
Figure (6-6): The effect of changes in Total
Fertility

49
The GDP variable does not respond for change in Total Fertility. we are interested in
the behavior of "Aggregate Demand ." and "GDP" What parameters and initial values
should be used in a sensitivity analysis of the Yemen macroeconomic model?
We assume that Investment Fraction, Total Fertility, Fraction of private Consumption,
Average Propensity to Consume, Investment Rate for Oil Sector and Investment Rate
for agriculture Sector are the parameters which we use in sensitivity analysis of our
model.
Second Scenario
We change value of parameter during the time as follow:
1- Increase of the Investment Fraction to one unit
2- Decrease of the Total Fertility to three child/wn
3- Decrease of the Fraction of Private Consumption to 0.5625
4- Decrease of Average Propensity to Consume to 0.6625
5- Increase of Investment Rate for agriculture Sector to 0.55
6- Decrease of Investment Rate for Oil Sector to 0.025
below graphs show response of the model to change in parameters which we selected
in Second Scenario.

Graph of Response to change in parameters
6e+014
4.5e+014
3e+014
1.5e+014
0
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
R
i
a
l
/
Y
e
a
r

GDP at Market Price : initial simulation
GDP at Market Price : Second Scenario

Rial/year
Rial/year
Figure 6-8: The effect of changes in parameters of Second Scenario

50


2e+012
1.5e+012
1e+012
500 B
0
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
R
i
a
l
/
Y
e
a
r

Total of Agriculture Production : Initial Simulation
Total of Agriculture Production : Second Scenario
Rial/year
Rial/year

6e+014
4.5e+014
3e+014
1.5e+014
0
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
R
i
a
l
/
Y
e
a
r

Aggregate Demand : Initial Simulation
Aggregate Demand : Second Scenario
Rial/year
Rial/year

51


40 B
30 B
20 B
10 B
0
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
B
a
r
r
e
l
/
Y
e
a
r

Production Rate of Curd Oil : Initial Simulation
Production Rate of Curd Oil : Second Scenario
Figure 6-12 : The effect of changes in parameters of Second Scenario
barrel/year
barrel/year

0
-15 M
-30 M
-45 M
-60 M
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
R
i
a
l
/
Y
e
a
r

Net Agriculture Export: Initial Simulation
Net Agriculture Export : Second Scenario
Rial/year
Rial/year
Figure 6-11 : The effect of changes in parameters of Second Scenario

52


20 M
15 M
10 M
5 M
0
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
R
i
a
l
/
P
e
r
s
o
n

Income per Capit YR : Initial Simulation
Income per Capit YR : Second Scenario
Rial/person
Rial/person

8e+013
6e+013
4e+013
2e+013
0
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
R
i
a
l
/
Y
e
a
r

Total Domestic Investment : Initial Simulation
Total Domestic Investment : Second Scenario
Rial/year
Rial/year

53

Sensitivity analysis again showed that changing the value of parameters makes some
difference in the behavior of the model, while the general behavior mode is relatively
insensitive to parameter changes. Some parameter changes affect the behavior to a
larger extent than others. Changes in some parameters affect the equilibrium values.
We can make a thousand of scenarios and notes for all change in variables or model
behavior easily.
8.Conclusions
We studied System Dynamics models and its implementation on macroeconomics
analysis to know the real behavior of complex system and solved the problem which
emerge when we cant have more of data and we compared it with another models
(regression). It is distinguished from others because it provides wide look for the
problems and means of detecting changes in system which we study. Although the
system contains more than 600 variables and their major interrelated relations, it is
easily to be understood and competence of the controlling the change tools which give
us distance of forecasting to a long term and ability to strategically planning.
System Dynamics models can provide better forecasts than traditional approaches. In
and of itself, this should allow decision maker to make better decisions. But in
addition, the use of System Dynamics models for forecasting allows decision makers
to: (1) get an early warning of sectors structural changes, (2) identify key sensitivities
and scenarios, and(3) determine appropriate buffers and contingencies for forecast
inaccuracies. These benefits can further enhance business performance. Therefore we
can define the System Dynamics as a modern type of statistical analysis depends on
feedback data and concerns with making nonlinear and two-way relationships
between variables interacting with each others to estimate parameters having more
specificity and reality.
40 M
30 M
20 M
10 M
0
1990 1994 1998 2002 2006 2010 2014 2018
Time (Year)
P
e
r
s
o
n

Population : Initial Simulation
Population : Second Scenario
Figure(6-15) : The effect of changes in parameters of Second Scenario
Person
Person

54
9.Recommendation
The importance of any statistical models establish from their ability to relating all
variables which we think make effect on phenomena that we study, and our ability to
change the structure of this model when we need that. also we can evaluate a quality
of the statistical model and its ability to prediction for variables behavior when we use
efficient estimate method for parameters to get much reality and less standard error
with high statistical significance for expected values in the model. System Dynamics
model provides us all above mentioned things. Therefore we recommend to use this
model in studying all economical phenomenon and build real structure of all
subsystem in our model and revise all of macroeconomic policies in Yemen. We need
to make strategically planning for a long time for the wealth sources in our country
because the result of the initial simulation in our model is very dread as long as we
depend on oil production only to provide the economic activity. we must think about
next generations and should make good plans by choosing perfect and scientific
method to evaluate and analyze the present time to build the wide base for future.
System Dynamic model leads us to know the behavior of system components now
and in the future, also it enables us to change the economic, social, political, financial
and educational policies and know the effects of change in our life.
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Applying System Dynamic Model For Macroeconomic Analysis of Yemen

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