JOURNAL OF ECONOMIC GROWTH AND DEVELOPMENT RESEARCH
Year:2019 | Volume:9 | Issue:33 |Papers Count:14

The aim of this article is to analyzing the effect of shocks of fiscal consolidation policy on the macroeconomic variables of Iran. In this regard by using Factor Augmented Vector Auto Regression (FAVAR) method the effect of shocks on government revenues and expenditures on important macroeconomic variables including total real GDP growth, inflation, private consumption growth and investment growth over the period 1984: 1-2015: 4 is investigated. The results of research models show that the effect of fiscal consolidation policy on the macroeconomic variables are different, and it is difficult to provide a same policy tool to effect all variables. Thus with emphasis on real GDP growth which is a major factor that affects other macroeconomic variables, it can be noted that in short term which consists of 4 seasons, reducing public expenditures and increasing government revenues lead to a reduction in production in response to a negative reaction to investment and private consumption and inflation will decrease. Therefore in the short term the suitable policy for fiscal consolidation is a combination of expenditure cut and income rising and in particular, the policy of reducing current expenditure and increasing import taxes. In the medium and long term, respectively consist of 8 and 16 seasons, real GDP growth responses positively to the expenditures cut policy, decline in current expenditures and social public expenditures is introduced as an instrument of fiscal consolidation policy.

In an economy system, government activities play a fundamental role in economic growth and development of countries, but increase these activities have a positive effect on economic growth until a certain threshold and from this threshold excessive increase in government activities not only have no positive effect on economic growth, but these activities are main barrier to growth. Including of these activities, can mention the government's capital expenditures and public debt. In this study, is tried to study the threshold effects and nonlinear government investment and public debt on GDP in two separate models during of 2000-2016 using of provincial data and Panel Smooth Transition Regression Model (PSTR). The results of linearity test show that there is a nonlinear relationship between variables. Also, the inclusion of a transfer function with a threshold parameter which is representing a two-regime model, is sufficient to determine the nonlinear relationship between variables. The results show that public debt and investment in first regime have a positive effect on GDP, but by crossing of threshold and entering to second regime, severity of this effect will be increased and negative. It seems, this result is due to the crowed-out effect on private sector and increase in public debt due to rising government spending and confirms Laffer curve hypothesis.

The purpose of this study is to investigate wheatear fiscal expansion of monetary policy leads to inflation and what are its short-term and long-term consequences on the economy. The results showed that the consumption, production, and investment variables will be negatively affected by this mode of financing in the long run. The findings of policy shock functions indicate that increasing in the money stock leads to increase in the short term investment but reducing household labor hours will reduce production because of inflation. For example, increasing in the amount of a standard deviation would increase the inflation rate by 1. 157 % as well as it would reduce household labor hours, real money balance, production and consumption respectively by 0. 062%, 0. 157%, 0. 0368%, and 0. 157%. On the contrary, this policy will increase capital by 0. 264% and investment by 6. 3%.

Sustainability of macroeconomics is one of the most important economic issues of the country in recent years. Stable economies are more resilient and less agitated while facing destructive shocks. In this paper, the impact of macroeconomic sustainability indices on the total price index of Tehran Stock Exchange (TEPIX) during the period of 2000-2016was investigated. The used methodology is Bayesian Vector Auto Regressive (BVAR) model. All Bayesian models consist of three basic components of the prior density function, the function of the righting reflex and the function of the posterior density, and various results can be obtained depending on which type of function is used in the model. The macroeconomic sustainability indicators include: the ratio of budget deficit to GDP, the misery indicator, and the ratio of the trade deficit to GDP. Finally, using the instantaneous response function, the impacts of macroeconomic sustainability indicators on the total stock price index is estimated. The results show that the budget deficit of the government has a positive effect on the total stock price index. This positive effect has been declining after three periods and loses its effect after 8 periods. The impact of misery indicator on the total stock price index is also positive which its effect decreases and vanishes after the second and eighth periods, respectively. The trade balance impact has a negligible initial effect on the total stock price index, which has been declining after the third period despite of the first increase until the second period.

Planning and policy making in the field of economic growth as one of the major macroeconomic goals requires special attention to the energy sector, the environment and its relation to production. Hence, in this paper, the effects of energy consumption shocks on carbon dioxide emissions and economic growth in selected countries of the MENA have been studied using the PVAR approach as well as Iran using the VAR method, and the results indicate that the energy shocks would initially lead to a relatively high increase and then a decrease in per capita GDP in the selected countries. The energy shock also initially increased carbon dioxide emissions and subsequently reduced pollution in subsequent periods and will move to the balance in long-term; also, in the Iranian economy, a shock to energy consumption first begans to sharply increase in economic growth after four periods, and eventually returns to a long-term equilibrium. Eventually, with a shock in total energy consumption, carbon dioxide emissions are mildly increased and then begin to decrease from the third period. Total energy consumption, foreign direct investment, labor force, and capital stock have a direct and significant relationship with economic growth, but carbon dioxide emissions have a significant negative relationship in Iran's economy.

Foreign direct investment (FDI) is one of the major factors affecting the economic growth and development of a country. Iran's economic condition not only steers liquidity towards non-productive activities but also doesn't have sufficient domestic capital for economic growth and propensity. Thus, absorption of the foreign financial funds seems to be a useful and effective way to compensate for this shortcoming. Therefore, in this paper, we discuss on the importance of the variables affecting the FDI absorption in Iran during the period 1981-2016 using fuzzy regression with emphasis on the role of income tax. The results of the research show that income tax has a small effect on Iran's FDI absorption with a negative and negligible fuzzy coefficient. Further, income tax is not considered as the main determinant factor in attracting foreign investment in Iran. Also, economic factors such as GDP, commercial openness, human capital and population have a positive effect and inflation and exchange rates have a negative effect on FDI inflows in Iran.

The 2007 global financial crisis showed that financial cycles is one of the reasons for the fluctuations of macroeconomics and could create business cycles. If there is such a relationship, adopting an active policy response to smooth financial cycles seems necessary. The present study investigates the dynamics of the relationship between financial cycles with business cycles and the inflation gap in Iran's economy during 1990: 1 – 2016: 4. To accomplish this, first, a financial condition index for Iran's economy has been created. In addition, the causality test has been conducted in the frequency domain and available frequencies have been determined to predict economic growth whit the index. Then, in order to investigate the purpose of the research and analysis in the frequency domain and time-frequency domain, the new Maximal Overlap Discrete Wavelet Transform and Continuous Wavelet Transform tools are used. The results show the relationship between financial cycle and the business cycle in the short run and long run is bilateral and extremely unstable. In the medium run, the business cycle is a leading variable, but the phase difference between the two variables in the 1990s is different from those of the 2000s. In the medium run, the financial cycles have kept inflation away from its long run trend. But in the long run and after 2007, this relationship has been reversed. According to the results of the research, it is recommended that monetary policy makers, in addition to smoothing output and inflation around their long run trends, should also consider this for the financial sector so that the two objectives above can be achieved with lower error in different frequencies.

The economic vulnerability of some countries stems from the fact that their economies are largely influenced by forces outside their control. Areas that are most affected by economic shocks should promote the position of a resilient economy in their policies. This paper tries to examine the impact of economic vulnerability on the development index of MENA countries in the 1995-2015 period using the econometric method and panel data approach. The results of the study indicate a negative and significant relationship between economic vulnerability and development index in the target countries. The innovation of this study is to calculate the impact of economic vulnerability in different countries. Iran is ranked sixth in terms of the fragility of the economy against economic shocks. Countries that are ranked worse are often those countries that either face political instability (domestic wars) or have a strong dependence on oil revenues. In this way, policies such as reducing dependence on oil revenues and paying attention to political stability are introduced as tools for controlling and strengthening the economy against external economic shocks.

The share of taxes to total public revenues differs among countries, and the main factors that have been discussed as the cause of the difference in the tax structure are the level of development of countries that are typically represented by gross domestic product per capita, productive expertise, or the structure of the economy; external factors such as the level of foreign direct investment and trade. The amount of public debt and public policies, including exchange rates, inflation and fiscal policies, government efficiency and organizational factors, such as political stability, accountability and transparency, civil and political rights, education levels, general expenses for education, etc, are also determinants of tax revenue. The purpose of this study was to investigate the effect of development indicators on the tax revenues of Iran during the period of 1979-2017 based on the Autoregressive Distributed Lag Model (ARDL) method. Based on the results of this study, the increase of per capita GDP in the country has a positive effect on the ratio of direct taxes to GDP, but has a negative and significant effect on the ratio of indirect tax to GDP. Also, the impact of the human development index on the ratio of direct taxes and indirect taxes to GDP is positive and significant and the effect of the index of inequality of income distribution, that is the Gini coefficient, on the ratio of direct taxes and indirect taxes to GDP, was negative and significant. Finally, the effect of the combined development index on the ratio of direct taxes to GDP as well as the ratio of indirect tax to GDP has been positive and significant. Also, the country's oil revenues have a negative and significant effect on the ratio of direct taxes and indirect taxes to GDP.

One of the important macroeconomic variables is national savings. National saving can be affected by several factors, one of these factors is population age structure. Scientific and quantitative determination of the impact of population age structure on national saving is an important issue that is discussed in this paper. In this study relied on Ando and Modigliani's life-cycle hypothesis, has been analyzed the effect of population age structure transitions on national saving in Iran. For this purpose, a model is proposed to explain the national saving and demographic variables included in the model and coefficients have been estimated using an Auto Regressive Distributed Lag Model (ARDL). National savings model consists of two equations, one of the equations represents the long-run equilibrium relationship and other indicates short-run dynamic. In addition, the method of error correction is used for determining the adjustment speed of dynamic model toward long run equilibrium. Annual time series data for the period 1984-2016 have been used. The findings show that the population age structure is an effective factor in formation of the national savings. Increasing the proportion of people in the age group 20 to 24 years reduces national saving. Against, increasing proportion of population aged 25 to 54 years, will increase in national savings. Most of the savings made by the group aged 35-44 years. On the other hand, the increase of population in the age group 55 years and more, again, reduces national saving.