AN INVESTIGATION OF FISCAL SUSTAINABILITY AND FISCAL TRANSITORY SHOCKS IN IRANIAN ECONOMY

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FALAHATI ALI; FATAHI SHAHRAM; HEIDARI DISGARANI ALI; SHOKRI NAEEM

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Journal: Financial Economics Year:2018 | Volume:11 | Issue:41 Page(s): 123-154

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Title

AN INVESTIGATION OF FISCAL SUSTAINABILITY AND FISCAL TRANSITORY SHOCKS IN IRANIAN ECONOMY

Author(s)

FALAHATI ALI | FATAHI SHAHRAM | HEIDARI DISGARANI ALI | SHOKRI NAEEM | Issue Writer Certificate

Keywords

IRANIAN ECONOMYQ2

FISCAL SUSTAINABILITYQ2

FISCAL SHOCKSQ1

IMPULSE RESPONSE FUNCTIONSQ1

Abstract

Due to the role of the government in the IRANIAN ECONOMY, the government's financial behaviors, budget fluctuations, and government fiscal policies, which are due to fluctuations in oil prices and oil revenues, play an important role in the performance of the IRANIAN ECONOMY. For this purpose, this study examines the FISCAL SUSTAINABILITY and sustainability shocks in the IRANIAN ECONOMY during the period 1978-2014. In this study, the presence or absence of FISCAL SUSTAINABILITY in Iran will be discussed using Engel-Granger and Johansson co-integration. The examination of a relationship between government expenditures and revenues using Engel-Granger co-integration test shows that an increase in revenue increases expenditure more. So the results of the Engel-Granger co-integration test for the sustainability of fiscal policy suggests that the fiscal policy is unsustainable in Iran. Furthermore, the results of estimating fiscal response functions suggest that debt adjustments are happening more from the government spending side, which confirms the existence of fiscal unsustainability in Iran. In the second part of this study, using the Vector Auto-Regressive Model (VAR) and Impulse Response Function (IRF), the effects of transitory FISCAL SHOCKS in the long run on three variables, non-oil revenues, government spending, and oil revenues have been examined.The results show that transitory FISCAL SHOCKS have no effect on the above-mentioned variables in the long run, and this is a special privilege for the government to implement unexpected financial decisions.

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APA: Copy

FALAHATI, ALI, FATAHI, SHAHRAM, HEIDARI DISGARANI, ALI, & SHOKRI, NAEEM. (2018). AN INVESTIGATION OF FISCAL SUSTAINABILITY AND FISCAL TRANSITORY SHOCKS IN IRANIAN ECONOMY. JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT), 11(41 ), 123-154. SID. https://sid.ir/paper/229147/en

Vancouver: Copy

FALAHATI ALI, FATAHI SHAHRAM, HEIDARI DISGARANI ALI, SHOKRI NAEEM. AN INVESTIGATION OF FISCAL SUSTAINABILITY AND FISCAL TRANSITORY SHOCKS IN IRANIAN ECONOMY. JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT)[Internet]. 2018;11(41 ):123-154. Available from: https://sid.ir/paper/229147/en

IEEE: Copy

ALI FALAHATI, SHAHRAM FATAHI, ALI HEIDARI DISGARANI, and NAEEM SHOKRI, “AN INVESTIGATION OF FISCAL SUSTAINABILITY AND FISCAL TRANSITORY SHOCKS IN IRANIAN ECONOMY,” JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT), vol. 11, no. 41 , pp. 123–154, 2018, [Online]. Available: https://sid.ir/paper/229147/en

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