Studying Threshold Effects of Government Investment and Public Debt in an Economic Growth Model for Iran Provinces; Using a Panel Smooth Transition Regression Model (PSTR)

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FALAHATI ALI; HEIDARIAN MARYAM

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Paper Information

Journal: JOURNAL OF ECONOMIC GROWTH AND DEVELOPMENT RESEARCH Year:2019 | Volume:9 | Issue:33 Page(s): 41-56

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Title

Studying Threshold Effects of Government Investment and Public Debt in an Economic Growth Model for Iran Provinces; Using a Panel Smooth Transition Regression Model (PSTR)

Author(s)

FALAHATI ALI | HEIDARIAN MARYAM | Issue Writer Certificate

Keywords

Government InvestmentQ2

Public DebtQ1

Economic GrowthQ2

Panel Smooth Transition Regression ModelQ1

Iran ProvincesQ1

Abstract

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.

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APA: Copy

FALAHATI, ALI, & HEIDARIAN, MARYAM. (2019). Studying Threshold Effects of Government Investment and Public Debt in an Economic Growth Model for Iran Provinces; Using a Panel Smooth Transition Regression Model (PSTR). JOURNAL OF ECONOMIC GROWTH AND DEVELOPMENT RESEARCH, 9(33 ), 41-56. SID. https://sid.ir/paper/192131/en

Vancouver: Copy

FALAHATI ALI, HEIDARIAN MARYAM. Studying Threshold Effects of Government Investment and Public Debt in an Economic Growth Model for Iran Provinces; Using a Panel Smooth Transition Regression Model (PSTR). JOURNAL OF ECONOMIC GROWTH AND DEVELOPMENT RESEARCH[Internet]. 2019;9(33 ):41-56. Available from: https://sid.ir/paper/192131/en

IEEE: Copy

ALI FALAHATI, and MARYAM HEIDARIAN, “Studying Threshold Effects of Government Investment and Public Debt in an Economic Growth Model for Iran Provinces; Using a Panel Smooth Transition Regression Model (PSTR),” JOURNAL OF ECONOMIC GROWTH AND DEVELOPMENT RESEARCH, vol. 9, no. 33 , pp. 41–56, 2019, [Online]. Available: https://sid.ir/paper/192131/en

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