LONG-RUN RELATIONSHIP BETWEEN BUDGET DEFICIT AND MACROECONOMIC PERFORMANCE OF THE IRANIAN ECONOMY: A THEORETICAL AND EMPIRICAL ANALYSIS

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JAFARI SAMIMI A.; ALIZADEH M.; AZIZI KH.

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Journal Paper

Paper Information

Journal: JOURNAL OF SUSTAINABLE GROWTH AND DEVELOPMENT (THE ECONOMIC RESEARCH) Year:2007 | Volume:6 | Issue:4 Page(s): 25-46

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Information Journal Paper

Title

LONG-RUN RELATIONSHIP BETWEEN BUDGET DEFICIT AND MACROECONOMIC PERFORMANCE OF THE IRANIAN ECONOMY: A THEORETICAL AND EMPIRICAL ANALYSIS

Author(s)

JAFARI SAMIMI A. | ALIZADEH M. | AZIZI KH. | Issue Writer Certificate

Keywords

BUDGET DEFICITQ2

COINTEGRATIONQ3

MACROECONOMIC PERFORMANCEQ3

EECONOMY OF IRANQ2

Abstract

The purpose of the present paper is to investigate the long run relationship between BUDGET DEFICIT and MACROECONOMIC PERFORMANCE of Iranian economy during 1979-2004. To do so, due to non-stationary properties of time series macroeconomic data and the deficiencies caused by traditional methods we have used a COINTEGRATION method of Johansen-Juselius to derive the long run COINTEGRATION vectors in order to deal the relationship between BUDGET DEFICIT and the macroeconomic variables The results show a negative long run equilibrium relation between BUDGET DEFICIT and economic growth but a positive one between public investment and economic growth. We have also found a negative relation between BUDGET DEFICIT and inflation. The control of BUDGET DEFICIT and reforms of public sector, along with promotion of private sector and less dependency on central bank is suggested in order to alleviate the detrimental impacts of the BUDGET DEFICIT.

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