FISCAL POLICY is an important macroeconomic POLICY tool for dampening the amplitude of business cycles in the oil-exporting countries. This importance derives from the fact that these countries have the highest volatility of output in the world and that a majority of countries have exchange rate pegs or manage their exchange rates, thereby limiting the scope of monetary POLICY. The main objective of this paper is to characterize and explain the determinants of the cyclical behavior of FISCAL POLICY in Iran during 1979-2011. To this end, we overcome the endogeneity problem using the Generalized Methods of Moments (GMM). We find that FISCAL POLICY is strongly pro-cyclical and oil price volatility and quality of institutions have an important role in determining the degree of cyclicality in FISCAL POLICY. In addition, we focus on the role Played by the FISCAL rule, which appears to be a key determinant of a country’s ability to escape the pro-cyclicality trap and actually become countercyclical. However, we find that national FISCAL rules defined in the Third Development Plan as expenditure rule and oil Price-based rule (Foreign Exchange Reserve Account (FRA) Foundation) do not affect the reduction of FISCAL POLICY pro-cyclicality. Furthermore, we conclude that Iran is unable to run countercyclical FISCAL policies if it has weak institutions quality.

The Government can use appropriate FISCAL POLICY to address the Weaknesses and strengths of economy and take steps in order to achieve national production boom and eliminate poverty and unemployment. In this research by the aim of determining the priority of FISCAL POLICY based on Moqawama Economy strategies FISCAL policies were examined and also the economic intellectual pattern in Iran in order to determine their closeness to Moqawama Economy strategies were analyzed.Descriptive method is the method of this research. In these area economic justice criteria, economic growth, economic stability, economic internalization, and resistance against threats are as Moqawama Economy indicators. Then by the Analytic hierarchy process (AHP) method selected policies that have the highest impact on implementation of Moqawama Economy strategies have been ranked and active intellectual patter in Iran economy based on closeness to Moqawama economy strategies were ranked too.The results of the research showed that "the establishment of a comprehensive economic information system for improving the economic and tax structure in the country" has the most importance in a POLICY based on the Moqawama economy strategy, and the intellectual pattern of "Islamic economics" is the most closely aligned with the Moqawama economy strategy in FISCAL POLICY environment.