Impact of Government Fiscal Policy on Iranian Economy under Different Exchange Rate Regimes; Application of CGE Model

This study investigated the impact of decrease in government expenditure on macroeconomic variables using Computable General Equilibrium (CGE). The applied CGE model is based on the Iranian Social Accounting Matrix (SAM) of 1378 The obtained results from CGE model revealed that decrease in government expenditure، under floating (fixed) exchange rate regime results in GDP reduction (increase) a little. While prices increase insignificantly only when floating exchange rate regime is considered. In addition، it was found that reduction in government expenditure under fixed exchange rate regime may lead to increase in exports especially agricultural exports. The results also showed that reduction in government expenditure contributes to agriculture output expansion while it shrinks non -agriculture output