THE RELATIONSHIP BETWEEN GOVERNMENT SIZE AND ECONOMIC GROWTH IN IRAN: BOUNDS TESTING APPROACHES AND TODA AND YAMAMOTO'S CAUSALITY

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MOLAEI MOHAMMAD; GOLKHANDAN ABOLGHASEM

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Journal: ECONOMIC STRATEGY Year:2014 | Volume:2 | Issue:7 Page(s): 107-130

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Title

THE RELATIONSHIP BETWEEN GOVERNMENT SIZE AND ECONOMIC GROWTH IN IRAN: BOUNDS TESTING APPROACHES AND TODA AND YAMAMOTO'S CAUSALITY

Author(s)

MOLAEI MOHAMMAD | GOLKHANDAN ABOLGHASEM | Issue Writer Certificate

Keywords

WAGNER’S LOWQ2

KEYNESIAN VIEWQ2

BOUNDS TESTQ2

TODA AND YAMAMOTO’S CAUSALITY TESTQ2

Abstract

There are Two important approaches about the relationship between government size and economic growth. According to Keynesian approach the economic growth is determined by government size. According to Wagner law, on the other hand, the government expenditures are results of economic activities. Thus, if the society's real incomes increase, the public expenditures grow and the government size increase too. Recently, some empirical studies showed that there are bilateral causality between economic growth and the size of government. Our study tests Wagner’s law (using various specifications proposed by Huang) and compares it to KEYNESIAN VIEW, for the case of Iranian economy during 1965-2010. To analyze, we use annual time series including unit root test and two methods: casual BOUNDS TEST approaches based on unrestricted error correction model (UECM) (Pesaran, Shin and Smith (2001)) as well as Toda and Yamamoto's Granger non-causality test (1995). Findings show a one-way causality from government size to economic growth (Verified KEYNESIAN VIEW). Some reasons are non-optimal management of government and the structure of the Iranian oil-dependent economy.

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APA: Copy

MOLAEI, MOHAMMAD, & GOLKHANDAN, ABOLGHASEM. (2014). THE RELATIONSHIP BETWEEN GOVERNMENT SIZE AND ECONOMIC GROWTH IN IRAN: BOUNDS TESTING APPROACHES AND TODA AND YAMAMOTO'S CAUSALITY. ECONOMIC STRATEGY, 2(7), 107-130. SID. https://sid.ir/paper/233832/en

Vancouver: Copy

MOLAEI MOHAMMAD, GOLKHANDAN ABOLGHASEM. THE RELATIONSHIP BETWEEN GOVERNMENT SIZE AND ECONOMIC GROWTH IN IRAN: BOUNDS TESTING APPROACHES AND TODA AND YAMAMOTO'S CAUSALITY. ECONOMIC STRATEGY[Internet]. 2014;2(7):107-130. Available from: https://sid.ir/paper/233832/en

IEEE: Copy

MOHAMMAD MOLAEI, and ABOLGHASEM GOLKHANDAN, “THE RELATIONSHIP BETWEEN GOVERNMENT SIZE AND ECONOMIC GROWTH IN IRAN: BOUNDS TESTING APPROACHES AND TODA AND YAMAMOTO'S CAUSALITY,” ECONOMIC STRATEGY, vol. 2, no. 7, pp. 107–130, 2014, [Online]. Available: https://sid.ir/paper/233832/en

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