Document Type : Research Paper
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Abstract
From a macroeconomics point of view, achieving economic growth and stability are two main targets of demand-management policies. Thus, this paper is aimed at examiningthe long term and short term relationship between fiscal and monetary shocks and economic growth in Iran during 1342-86 (1963-2007) periods. Using Auto-Regressive Distributed Lag models, estimated parameters show that in the long term, there is a asymmetric relation between fiscal shocks and economic growth. However, long term relation between monetary shocks and economic growth is not significant. As a 10 percent increase in positive government expenditure shocks leads to less than 10 percent increase in long term and short term economic growth, the long and short term relations between fiscal policy and economic growth is inelastic. Further, the ECM coefficient (0.532) reveals that the relationship between fiscal and oil shocks and economic growth is unbalanced and the annual depreciation speed is 53.2 percent.
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