The twin Deficits (Budget Deficit and current account Deficit) have been argued in the economic literature since 1980s. This is a period in which the studies about Budget Deficit and the current account Deficit were significantly increased in the United States. In the economic literature, there are two hypotheses: Keynesian hypothesis and Ricardian equivalence. The Keynesian proposition confirms the existence of a positive relationship between the two Deficits, whereas the Ricardian equivalence argues that the Budget and current account Deficits are not correlated.This study analyses the twin Deficit for 70 countries during 1985-2006 using the panel data. The reviewed countries, based on their incomes are classified into three groups: high incomes, middle incomes and low income countries. Effect of the Budget Deficit on the private consumption, current account Deficit and eventually the effect of Budget Deficit on the economic growth have been studied. The results show that there is not a significant relationship between the two Deficits and private consumption and economic growth in high income countries. But the results from the middle and low income countries confirm the significant relationship.

Relationship of Budget Deficit, inflation and value of money are some controversial issues mostly discussed in macroeconomics as a main concern of policy makers and economists in both developed and developing countries. Policy of Budget Deficit is known as one of the fiscal policies resort widely applied in most countries specifically in Iran. What is the relationship between Budget Deficit and macroeconomics variable, as the main focus of this study, has remained unanswered for a long time. Based on empirical studies, statistics show that the Budget Deficit and inflation relationship are not the same among countries sampled in this research. This research paper tends to analyze and examine the theoretical and empirical relationship of Budget Deficit and inflation during 1976 - 2005. Applying econometrics tests to evaluate the correlation between inflation and Budget Deficit, this relationship does not find any statistically significant variation.

Developing countries, including Iran, are trying to make up for the lack of private investment and other problems by trade Deficit and Budget Deficit policies. These policies are supported by Keynes and his supporters. They believe that expansionary effects will shift the macroeconomic Budget Deficit to equilibrium. But if the Budget Deficit policy is adopted without considering the total supply, it will cause more inflation and trade Deficit without eliminating the recession. In this study, in order to investigate the optimal path of Budget Deficit and trade Deficit in Iran's economy, based on the design of optimal paths of economic variables during the period of 1978-2017, an optimal control theory has been used. Therefore, considering the dynamic behavior of economic variables in the country, the BP-IS-LM model is fitted according to economic theories and based on the econometric bases through the three-stage least squares method. The results of this estimate are used to policy in optimal control theory. The results of this study indicate that Iran's economy will need to control the government expenditures to reach the desired level of target variables, and contractile financial policies will have better results in controlling twin Deficits.

The purpose of this paper is to investigate the factors affecting the structural and cyclical Budget balance using Quartery data during the period of 1996-2017. Fristly, the factors affecting the cyclical and structural Budget balance are identified using Sissokoand Dibooglu (2006) and inspired by Chalk (2002). Then, using the EU methodology, we will focus on the cyclical and structural components of the Budget. Finally, by using SVAR Approach. The effect of effective shocks; such as Taxes, government expenditures, GDP per capita, oil prices, inflation and terms of trade; on cyclical and structural Budget Deficits is investigated. According to research results, the oil prices shoks and current government expenditures are two variables that increase the adoption of discretionary decisions by governments and, consequently, the growth of structural Budget Deficits and the reduction of the power of influence of automatic stabilizers in the Iranian economy. And the shocks such as GDP per capita growth, inflation, investment government expenditure, and terms of trade have led to a reduction in structural Deficit and increasing in the power of influence of automatic stabilizers in Iran.

Fiscal policies have an effective and dynamic role in the process of economic development. They are an almost inseparable part of countries’ economic processes. The efficiency of fiscal policies is a function of proper arrangement and combination of fiscal policy instruments namely, the government revenues and expenditures as well as their flexibility and their being effective on economic goals. In Iran, however, fiscal policies are not sufficiently efficient due to the significant role of oil revenues in the government Budget and insufficient tax revenues alongside with inflexibility of government expenditures. The inefficiency of fiscal policies has, in its turn, back grounded the role of tax revenues in decreasing the government Budget Deficits. This study aims at examining the relationship between Budget Deficit fluctuations and tax revenues using a structural VAR approach. By imposing long-run restrictions on a VAR model, four structural shocks have been identified: oil income shock, real product shock, tax shock and government expenditure shock. The results show that an impulse in the tax revenue decreases the economic growth (a result which is in line with economic theory) but this negative effect converges to zero in the long-term. Positive impulses both in the oil income and the real product increase the tax revenue levels. Moreover, the government expenditure shock leads to an increase in tax revenues after three periods of time. The results of accumulative impulse response functions show that positive shocks both in oil income and tax revenue decrease the Budget Deficit levels but the decreasing effect of an oil income shock on the Budget Deficit is larger than the tax revenue. A variance decomposition of variables shows that real product shocks and tax revenue shocks are the main sources of fluctuation of tax revenues; but government expenditures shock dose not have an important role in explaining tax revenue changes. The high degree of dependency of the government Budget on oil revenues, unimportant role of taxes in Budget Deficit changes and great effects of structural factors in Budget Deficit fluctuations are main outcomes inferred from the variance decomposition of Budget Deficit.

Budget Deficit is the result of financial polices in economics. Using of these polices has significant and important effect on economy. The most important question about increasing of government debt or Budget Deficit is whether it is able to change the real variable in economy or not. We can find answer to this question by analyzing the outcome of Budget Deficit in short-run and long- run. In order to answer the question, relationship between Budget Deficit and money demand has been surveyed in this paper. In this paper, we survey the effect of Budget Deficit on money demand. There are three main theories: 1) Keynesian theory 2) Neoclassical theory and 3) Ricardian equivalence theory. The result based on econometrics models by using Iran economy data indicated that there is a long-run dynamics relationship between Budget Deficit and money demand.