THE EVALUATING OF THE EFFECTIVENESS OF EXPANSIONARY FISCAL POLICIES: COMPARATIVE LINEAR AND THRESHOLD VAR

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GHOLAMI ELHAM; HOZHABR KIANI KAMBIZ

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Journal: Financial Economics Year:2016 | Volume:10 | Issue:35 Page(s): 1-25

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Title

THE EVALUATING OF THE EFFECTIVENESS OF EXPANSIONARY FISCAL POLICIES: COMPARATIVE LINEAR AND THRESHOLD VAR

Author(s)

GHOLAMI ELHAM | HOZHABR KIANI KAMBIZ | Issue Writer Certificate

Keywords

EXPANSIONARY FISCAL POLICIESQ1

EFFECTIVENESSQ2

VECTOR AUTOREGRESSIVE MODELQ1

OUTPUT GAPQ2

Abstract

This paper aims to answer the question of whether expansionary fiscal policy (increasing government spending and tax cuts) on economic growth in Iran is in linear or non-linear effects? On this purpose, the performance of each of these programs using both linear and threshold VECTOR AUTOREGRESSIVE MODEL and the data years 1338 to 1391 is investigated. In this connection, when using the threshold model, the studied period observations based on positive or negative OUTPUT GAP was divided into two regimes. Impulse response functions results from the linear model indicate that reduced tax revenues and increased government spending as fiscal stimulus have led to increasing economic growth, but the impact of government spending is greater than tax revenues. Increasing government spending is most effective in threshold model, also. In addition, comparison of Impulse response functions from linear and threshold model show that response of GDP to tax revenues in linear model and positive OUTPUT GAP are almost identical. However, the effect of increasing government spending on GDP in linear model is very different from high regime. GDP response to tax revenues and government spending in lower regime is also different from the linear model. Accordingly, the EXPANSIONARY FISCAL POLICIES multipliers are dependent on economic conditions in terms of the OUTPUT GAP.

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APA: Copy

GHOLAMI, ELHAM, & HOZHABR KIANI, KAMBIZ. (2016). THE EVALUATING OF THE EFFECTIVENESS OF EXPANSIONARY FISCAL POLICIES: COMPARATIVE LINEAR AND THRESHOLD VAR. JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT), 10(35), 1-25. SID. https://sid.ir/paper/229000/en

Vancouver: Copy

GHOLAMI ELHAM, HOZHABR KIANI KAMBIZ. THE EVALUATING OF THE EFFECTIVENESS OF EXPANSIONARY FISCAL POLICIES: COMPARATIVE LINEAR AND THRESHOLD VAR. JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT)[Internet]. 2016;10(35):1-25. Available from: https://sid.ir/paper/229000/en

IEEE: Copy

ELHAM GHOLAMI, and KAMBIZ HOZHABR KIANI, “THE EVALUATING OF THE EFFECTIVENESS OF EXPANSIONARY FISCAL POLICIES: COMPARATIVE LINEAR AND THRESHOLD VAR,” JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT), vol. 10, no. 35, pp. 1–25, 2016, [Online]. Available: https://sid.ir/paper/229000/en

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