Optimum and Threshold Rates of Government Debt in Iran

Zamani, Reza; Majidi, Masoud

doi:10.30473/egdr.2020.51086.5644

Document Type : ORIGINAL ARTICLE

Authors

reza zamani ¹
masoud majidi ²

¹ Assistant Professor of Economics, Allameh Tabataba’i University, Tehran, Iran

² Master of Economics, Allameh Tabataba’i University, Tehran, Iran

https://doi.org/10.30473/egdr.2020.51086.5644

Abstract

Analysis of optimum and threshold rates of government debt in Iran and the effect of public debt on economic growth are the major purposes of this paper. As government debt is both economic and political phenomena, there are a lot of political economic literature that focus on some dimensions including intergerneration redistribution, re-election of governments, political budget cycles, fiscal illusion, and bargaining in legislation.
Government debt affects economic growth through six channels, including government expenditure, interest rate, future tax, possibility of vicious triangle crises (debt, bank, and currency crises), and counter cycle policies. There are three points about the effect of government debt on economic growth: positive, negative, or threshold effect. Using yearly data from 1974-2016 and OLS approach, we show that relationship between government debt and economic growth in Iran is inverse U, and the optimum rate of debt index (portion of government debt to GDP) in Iran is about 54.16 percent and the threshold level is about 108.32 percent.
Moreover, it has been shown that from 1974 to the middle of 2000’s, public debt to central bank was more than public debt to banking system, but after that mentioend trend has been reversed

Keywords

20.1001.1.22285954.1400.11.43.6.8

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Economic Growth and Development Research

Optimum and Threshold Rates of Government Debt in Iran

References

References

Volume 11, Issue 43
June 2021
Pages 124-103

Optimum and Threshold Rates of Government Debt in Iran

References

References

Volume 11, Issue 43June 2021Pages 124-103

Volume 11, Issue 43
June 2021
Pages 124-103