Composition of Government Spending, Optimal Fiscal Policy, and Endogenous Growth in the Economy of Iran (in Persian)

Mahdi Seyedkazemi (), Mohsen Zayanderoodi () and Abdolmajid Jalali ()
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Mahdi Seyedkazemi: Islamic Azad University, Science and Research Branch Tehran (Kerman)
Mohsen Zayanderoodi: Department of Economics, Islamic Azad University, Kerman
Abdolmajid Jalali: Department of Economics, Shahid Bahonar University of Kerman

The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی و بودجه), 2018, vol. 22, issue 4, 147-167

Abstract: This paper investigates the optimal fiscal policy, pertaining to government spending, considering different productivity of public services in production function and its impact on the optimal tax rate, the optimal rate of government spending, and optimal economic growth rate. Using the VECM model for Iranian economy over 48 years, results show while the current expenditure has a positive and significant impact on the optimal economic growth rate, capital expenditure has a negative and significant impact on the rate. In other words, since current expenditures result in an increase in consumer demand in the market, it is more productive in production function; However, such impact of current expenditures is only significant in the long-run. The findings also show that an increase in capital expenditure will increase the optimal rate of tax. Also, an increase of current expenditure ratio decreases the optimal share of current expenditure relative to capital expenditures

Keywords: Optimal Fiscal Policy; Economic Growth; Optimal Government Expenditure; VECM Model; Economy Iran (search for similar items in EconPapers)
Date: 2018
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