Fiscal versus Monetary Dominance: Evidence from Iran

Seyed Hamid Pourmohammad Gelsefidi (), Ali Tayyebnia (), Mohsen Mehrara () and Roodabeh Amirian ()
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Seyed Hamid Pourmohammad Gelsefidi : Kish International Campus, University of Tehran
Ali Tayyebnia : University of Tehran
Mohsen Mehrara : University of Tehran
Roodabeh Amirian : Sharif University of Technology

Journal of Money and Economy, 2018, vol. 13, issue 3, 375-400

Abstract: In this paper, we dealt with fiscal dominance, which is a situation in which the fiscal authority sets its expenditure and taxes without regard to any requirement of intertemporal budget balance. Therefore, the monetary authority must adjust its policies to ensure that the government budget is in balance. The existence of oil revenues for the government on the one hand and its lack of access to the financial market, on the other hand, are reasons that we can see financial repression and fiscal dominance in the economy of Iran. This paper presents forward-looking estimates of the relationship between the change in the consolidated primary deficit and the change in the monetary base. This study covers the period 1978-2017, and an autoregressive approach is applied. We conclude that using the budget data only, the existence of fiscal dominance cannot be rejected.

Keywords: Fiscal Dominance; Monetary Dominance; Macroeconomics; Financial Market (search for similar items in EconPapers)
JEL-codes: C40 E31 I32 (search for similar items in EconPapers)
Date: 2018
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