Impact of Fiscal Policy on Economic Growth in Iran

European Journal of Economics, Finance and Administrative Sciences
ISSN 1450-2275 Issue 36 (2011)
© EuroJournals, Inc. 2011
http://www.eurojournals.com

Impact of Fiscal Policy on Economic Growth in Iran
Mehdi Safdari
Assistant Professor of Faculty of Economics
University of Sistan and Baluchestan, Iran
Masoud Abouie¬¬ Mehrizi
Islamic Azad University, Mehriz Branch, Iran
Marzie Elahi
Islamic Azad University, Mehriz Branch, Iran
Abstract
In this paper, equivalence relation and long term of six variables Gross domestic
product growth rate, Gross domestic product growth rate, Growth of exchange rate, Growth
of the price index of goods and services, Growth of government consumption expenditure,
Growth of government investment spending and Growth of incomes tax and also their
influences on each other in Iran and for years 1973-2008 has been analyzed. In this purpose
vector autoregressive model (VAR) has been used. First, stability of variables by the use of
dickey-fuller test has been examined. Next, analysis of Johnson test for considering the
convergence among six variables has been used. The results of this research show that
variables of Gross domestic product growth rate, Gross domestic product growth rate,
Growth of exchange rate, Growth of the price index of goods and services, Growth of
government consumption expenditure have negative effect on economic growth and
variables of growth of incomes tax and Growth of government investment spending has a
positive effect on economic growth.

Keywords: Fiscal Policy – Gross domestic product growth rate–Vector Autoregressive
Model (VAR).
JEL Classification Codes: C22, O47

1. Introduction
Macroeconomic relationship between fiscal policy and economic growth always has been of interest to
economists. For this reason many studies have been done in this area.
A group of economists believe that economic growth is the result of capital accumulation and
other group believes that technical...