The Impact of Uncertainty of Government Expenditures on Economic Growth of Iran (Application of Fully Modified Ordinary Least Square Approach)

The government de facto as the paramount and effective institution in the field of economics and its manifested behaviors which are rendered as public revenues and public expenditures in the economy per se, have been the core subjects of debates and controversies in various schools of thought, sine die. Hence, to examine the observed role of government in the process of economic growth of Iran, an attempt is made in this paper to investigate the impact of government expenditures uncertainty on economic growth of Iran for the study period of 1980 to 2015. For the purpose of estimating the government expenditures uncertainty, we have utilized the EGARCH (1,1) method and in turn to estimate the impact of government expenditures uncertainty on economic growth of Iran, we have applied the Fully Modified Ordinary Least Square Method (FMOLs) pro rata. The results prima facie indicate that in the long run, the government expenditures uncertainty variable in its logarithmic form bears a coefficient of -0.03, and will have a negative but significant effect on the economic growth, Sine qua non. Thus, we can conclude that, since the public expenditures are de jure, deemed as one of the most important components of the aggregate demand in the economy, it may be postulated that the government expenditures uncertainty viz-a-viz constituting instability in the aggregate demand, can generate stochastic variation in the aggregate output and economic growth, Sui generis.