The Choice of the Best Tax Base to Finance Fiscal Stimulus Programs in Iran Using a Dynamic Stochastic General Equilibrium Model

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GHOLAMI ELHAM

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Journal: JOURNAL OF SUSTAINABLE GROWTH AND DEVELOPMENT (THE ECONOMIC RESEARCH) Year:2019 | Volume:19 | Issue:1 Page(s): 105-127

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Title

The Choice of the Best Tax Base to Finance Fiscal Stimulus Programs in Iran Using a Dynamic Stochastic General Equilibrium Model

Author(s)

GHOLAMI ELHAM | Issue Writer Certificate

Keywords

Fiscal Stimulus ProgramsQ2

MultiplierQ1

VATQ2

Dynamic stochastic general equilibrium model (DSGE)Q1

Abstract

The application of Fiscal Stimulus Programs (FSPs) to achieve economic growth requires knowing the source of its funding, because different methods and various taxation bases for financing of the FSPs affect their effectiveness and influence the economy. The objective of this paper is to choose the best tax base to finance FSPs in Iran, according to the lowest distortionary effects on efficiency of increasing government spending. For this purpose, first a dynamic stochastic general equilibrium (DSGE) model is designed for Iran. The model consists of three economic factors including the household, domestic firms, and the government as fiscal and monetary authority, and its reliability is checked through the calibration procedure. Then, the Multiplier of government spending is estimated within four scenarios for financing government spending. These include the application of tax on income, tax on consumption, a combination of tax on income and tax on consumption (value added tax) and the budget deficit policy. The results show that taxation compared to a budget deficit policy results in decreasing efficiency of the government's fiscal stimulus. However, the reaction of domestic production to the increase in government spending indicate that while a tax on consumption may cover government spending, it has a low negative effect on the efficiency of this fiscal stimulus.

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APA: Copy

GHOLAMI, ELHAM. (2019). The Choice of the Best Tax Base to Finance Fiscal Stimulus Programs in Iran Using a Dynamic Stochastic General Equilibrium Model. JOURNAL OF SUSTAINABLE GROWTH AND DEVELOPMENT (THE ECONOMIC RESEARCH), 19(1 ), 105-127. SID. https://sid.ir/paper/406723/en

Vancouver: Copy

GHOLAMI ELHAM. The Choice of the Best Tax Base to Finance Fiscal Stimulus Programs in Iran Using a Dynamic Stochastic General Equilibrium Model. JOURNAL OF SUSTAINABLE GROWTH AND DEVELOPMENT (THE ECONOMIC RESEARCH)[Internet]. 2019;19(1 ):105-127. Available from: https://sid.ir/paper/406723/en

IEEE: Copy

ELHAM GHOLAMI, “The Choice of the Best Tax Base to Finance Fiscal Stimulus Programs in Iran Using a Dynamic Stochastic General Equilibrium Model,” JOURNAL OF SUSTAINABLE GROWTH AND DEVELOPMENT (THE ECONOMIC RESEARCH), vol. 19, no. 1 , pp. 105–127, 2019, [Online]. Available: https://sid.ir/paper/406723/en

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