The nature of fiscal policy in Iran: A Vector Error Correction Approach with Exogenous Variables

In this research, the nature of Iran's fiscal policy has been evaluated in business cycles in the period of 1999: Q2- 2021:Q1. For this purpose, the specified model of Hristov (2013) has been used, in which adjustments have been applied due to the dependence of Iran's economy on oil revenues, and the time series of disposable income and consumption of the private sector from the household budget data published by the Iranian Statistics Center. , has been extracted. Also, the VECMX approach has been used to calculate the momentum of expenditures, tax and oil revenues. The results showed that the government spending in periods of economic boom and recession have a positive and significant effect on the growth of private sector consumption, in other words, fiscal policy in Iran is Keynesian in nature. But the intensity of the effects of government expenditure impulses on the growth of private sector consumption e is greater in periods of prosperity than in periods of recession. Also, the number of interruptions in the impact of government expenditure impulses on the growth of private sector consumption is different in the period of prosperity and recession, and this amount is more in the period of recession. In addition, the evaluation of other fiscal policy variables shows that the impulses of tax revenues on the growth of private sector consumption were not significant in business cycles, and the impulses of oil revenues are also positive and significant with four interruptions only in the period of prosperity.