An inquiry into the impact of current and capital government spending on the Iranian GDP in the short-run and long-run

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KHODAVAISI HASSAN; EZZATI SHOURGOLI AHMAD

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Journal: Journal of Economic Research Year:2016 | Volume:51 | Issue:2 Page(s): 327-353

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Title

An inquiry into the impact of current and capital government spending on the Iranian GDP in the short-run and long-run

Author(s)

KHODAVAISI HASSAN | EZZATI SHOURGOLI AHMAD | Issue Writer Certificate

Keywords

current spendingQ1

Capital spendingQ1

ARDL modelQ2

Barro growth modelQ2

Abstract

A number of economists argue that the capital expenditure has a positive impact and the current spending has negative impact on output while others believe that the government expenditure, regardless of being current or Capital spending, has a negative impact on the economy. In this direction, this paper tries to investigate the impact of current and capital government expenditure on output using ARDL approach with annual data for the Iranian economy during 1346-1393. The results indicate that in the short-run both current and capital expenditure, with one delay, have a significant negative impact on GDP while in the long-run both current and capital governments have a significant positive impact on GDP. We also show that the size of the estimated parameter of the capital expenditure is twice larger than the size of the estimated parameter of the current expenditure. Using Lumsdaine-Papell test, we show that there is a structural break in the Iranian economy in 1352 (at that time the first oil-shock happened and the oil revenue increased and as a result both government expenditure and inflation increased). In order to accommodate this break we add a dummy variable to the model and we also show that when both current and Capital spending are accompanied by inflation will have a negative impact on output.

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APA: Copy

KHODAVAISI, HASSAN, & EZZATI SHOURGOLI, AHMAD. (2016). An inquiry into the impact of current and capital government spending on the Iranian GDP in the short-run and long-run. TAHGHIGHAT-E-EGHTESADI, 51(2 ), 327-353. SID. https://sid.ir/paper/11958/en

Vancouver: Copy

KHODAVAISI HASSAN, EZZATI SHOURGOLI AHMAD. An inquiry into the impact of current and capital government spending on the Iranian GDP in the short-run and long-run. TAHGHIGHAT-E-EGHTESADI[Internet]. 2016;51(2 ):327-353. Available from: https://sid.ir/paper/11958/en

IEEE: Copy

HASSAN KHODAVAISI, and AHMAD EZZATI SHOURGOLI, “An inquiry into the impact of current and capital government spending on the Iranian GDP in the short-run and long-run,” TAHGHIGHAT-E-EGHTESADI, vol. 51, no. 2 , pp. 327–353, 2016, [Online]. Available: https://sid.ir/paper/11958/en

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