One of the major problems in Iranian economy is continuous deficit in the budget operating balance due to the non-optimal government size. The government often financed a part of this deficit by debt cearation. Government debts depends on its size and decomposition have variety macroeconomic effects. So, this study investigated the macroeconomic effects of government debt in iran during 1352-1393 by a SVAR model. the result showed that government debt to Nondepository Institutions leads to aggregate demand surplus, increasing of relative price of nontradable goods to tradable goods and decreasing of gdp. The debt to central bank increase price level and decrease gdp. Finally, government debt to other Depository Institutions leads to aggregate demand surplus, increasing of real exchange rate, decreasing of relative price of nontradable goods to tradable goods, decreasing of general price level and increasing of gdp. Also, according to the results of variance decomposition, the government can control a significant part of short run and long run macroeconomic fluctuations by managing its debts.
In the Iranian economy, part of the government's fiscal policies and liabilities is always financed by banks. As government debt to banks increases, the private sector's access to loans and facilities is limited. It can cause undesirable macroeconomic outcomes. This study investigates the macroeconomic effects of government debt on banks in Iran over 1972-2016 by using an SVAR model. Results show that government debt to banks does not significantly affect the aggregate demand ratio to aggregate supply and GDP per labor. Still, it significantly increases the real exchange rate and decreases the nontradable goods' ratio to tradable goods prices. In the long-run, the real exchange rate, the ratio of non-tradable goods to tradable goods price, and the general price level changed by 34.46, 20.95, and 46.4 percent, respectively, which can be explained by the government debt to banks. Results indicate that the government policy manages the Iranian economy.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.