THE RELATIONSHIP BETWEEN TAX REVENUES AND STATE BUDGET DEFICITS IN THE IRANIAN ECONOMY

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MOMENI VESALIAN HOOSHANG; DAGHIGHIASLI ALIREZA; ZAMANIAN MAHBUBE

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Journal: Financial Economics Year:2010 | Volume:4 | Issue:11 Page(s): 177-200

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Title

THE RELATIONSHIP BETWEEN TAX REVENUES AND STATE BUDGET DEFICITS IN THE IRANIAN ECONOMY

Author(s)

MOMENI VESALIAN HOOSHANG | DAGHIGHIASLI ALIREZA | ZAMANIAN MAHBUBE | Issue Writer Certificate

Keywords

TAXQ2

DEFICITQ2

OIL REVENUESQ2

GRANGER CAUSALITY TESTQ3

SVARQ3

Abstract

Fiscal policies have an effective and dynamic role in the process of Economic Development and so on this role depends on proper arrangement and combination of fiscal policy instruments. However in Iran, fiscal policies does not have enough efficiency due to significant role of OIL REVENUES in the government budget and insufficient TAX revenues alongside with inflexibility of government expenditures. This paper uses Granger causality and structural VAR frameworks to disentangle the dynamic and causal relationship between Iranian TAX revenues and budget DEFICIT. GRANGER CAUSALITY TEST applied for variables both in nominal and real values. The results support the synchronization hypothesis in nominal term; that is budget DEFICIT causes TAX revenues and vice versa. But institutional separation hypothesis suits well in real term. In the next step by imposing long-run restrictions on VAR model four structural shocks are identified: oil income shock, real product shock, TAX shock and government expenditure shock. Variance decomposition of variables shows government expenditures shock does not have an important role in explaining TAX revenue changes. High degree of dependency of government budget on OIL REVENUES, unimportant role of TAXes in budget DEFICIT changes and great effects of government expenditure in budget DEFICIT fluctuations are main outcomes inferred from variance decomposition of budget DEFICIT.The results of Impulse response functions shows that a positive impulse in oil income decreases economic growth budget DEFICIT in the first but this negative effect converges to zero in the long term. Also government expenditure shock leads to a significant increase in budget DEFICIT and so it can be inferred that controlling of government expenditure is the main approach to holding balance between government revenues and expenditures.

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APA: Copy

MOMENI VESALIAN, HOOSHANG, DAGHIGHIASLI, ALIREZA, & ZAMANIAN, MAHBUBE. (2010). THE RELATIONSHIP BETWEEN TAX REVENUES AND STATE BUDGET DEFICITS IN THE IRANIAN ECONOMY. JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT), 4(11), 177-200. SID. https://sid.ir/paper/229087/en

Vancouver: Copy

MOMENI VESALIAN HOOSHANG, DAGHIGHIASLI ALIREZA, ZAMANIAN MAHBUBE. THE RELATIONSHIP BETWEEN TAX REVENUES AND STATE BUDGET DEFICITS IN THE IRANIAN ECONOMY. JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT)[Internet]. 2010;4(11):177-200. Available from: https://sid.ir/paper/229087/en

IEEE: Copy

HOOSHANG MOMENI VESALIAN, ALIREZA DAGHIGHIASLI, and MAHBUBE ZAMANIAN, “THE RELATIONSHIP BETWEEN TAX REVENUES AND STATE BUDGET DEFICITS IN THE IRANIAN ECONOMY,” JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT), vol. 4, no. 11, pp. 177–200, 2010, [Online]. Available: https://sid.ir/paper/229087/en

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