The Effects of Fiscal Policy on Economic Growth in the Iranian Economy: The State-Space Models

Khodaei, Mehdi; Jafari, Mohammad; Fattahi, Shahram

Document Type : ORIGINAL ARTICLE

Authors

¹ Ph.D. Student in Economics, Lorestan University, Lorestan, Iran

² Assistant Professor in Economics, Lorestan University, Lorestan, Iran

³ Associate Professor in Economics, Razi University, Kermanshah, Iran

Abstract

Macro-economic relationship between fiscal policy and economic growth has long been considered by economists. In this study to evaluate the more accurate effect of the government's fiscal policy in the economy, using quarterly data for the years 1988 to 2016, a factor-augmented vector autoregressive (FAVAR) model with time varying parameter model (TVP) in Iran's economy has been modeling. The variables of GDP growth, investment growth, inflation, exchange rates, the growth of private consumption expenditure and latent variable of government fiscal policies are used in model. Based on results the effects of fiscal policy on economic growth in the whole period is positive and investment increased the rate of economic growth. Also the additive positive effects of fiscal policy on the unofficial exchange rate has increased over time. In addition, the effect of fiscal policy on inflation is positive, so that the additive effect in economic prosperity period is more. Finally, the effect of fiscal policy on private sector spending is negative. Results of this study show changes in relationships between variables over time and also indicate that economic conditions of the country affects the impacts of independent variables.

Keywords

20.1001.1.22285954.1397.8.31.5.2

Main Subjects

Economic Growth

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Economic Growth and Development Research

The Effects of Fiscal Policy on Economic Growth in the Iranian Economy: The State-Space Models

References

References

Volume 8, Issue 31
June 2018
Pages 79-92

The Effects of Fiscal Policy on Economic Growth in the Iranian Economy: The State-Space Models

References

References

Volume 8, Issue 31June 2018Pages 79-92

Volume 8, Issue 31
June 2018
Pages 79-92