Document Type : Research Paper

Authors

faculty member/ monetary and banking research institute (MBRI)

Abstract

In the present study, the effects of government financial variables’ shock on private sector consumption expenditures during the seasonal sequence of 1370-1395 is evaluated. To this aim, the framework proposed by Tagkalakis (2008) and Hristov (2013) is used while some adjustments are made due to the dependence of the Iranian economy on oil revenues. The results show that tax revenue shocks on private sector consumption expenditures in business cycles is not significant and current government expenditures during economic boom and recession periods and construction expenditures during recession periods have a positive and significant effect on the growth of private sector expenditures. Moreover, the effects of current expenditure shocks on private consumption growth are higher during boom and recession periods and also the impact of current spending shocks is greater than government construction expenditures on private sector expenditure growth during the recession.

Keywords

Main Subjects

Alesina, A., S. Ardagna, R. Perotti & F. Schiantarelli. (1999). Fiscal policy, profits. and Investment. ##Alesina, A., S. Ardagna, R. Perotti & F. Schiantarelli. (2002). Fiscal Policy, Profits, and Investment. American Economic Review, 92(3), 571-589. ##Baldini, M. A. (2005). Fiscal Policy and Business Cycles in an Oil-Producing Economy: The Case of Venezuela (No. 5-237). International Monetary Fund. ##Baum, A. & G.B. Koester. (2011). The Impact of Fiscal Policy on Economic Activity over the Business Cycle-Evidence from a Threshold VAR Analysis (No. 2011, 03). Discussion Paper Series 1: Economic Studies. ##Blanchard, O. & R. Perotti. (2002). An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output. The Quarterly Journal of Economics, 117(4), 1329-1368. ##Bry, G. & C. Boschan. (1971). Programmed Selection of Cyclical Turning Points. In Cyclical Analysis of Time Series: Selected Procedures and Computer Programs (pp. 7-63). NBEr. ##Burnside, C., M. Eichenbaum & J.D. Fisher. (2004). Fiscal Shocks and Their Consequences. Journal of Economic theory, 115(1), 89-117. ##Carmignani, F. (2010). Cyclical Fiscal Policy in Africa. Journal of Policy Modeling, 32(2), 254-267. ##Correa, J.A., C. Ferrada, P. Gutiérrez & F. Parro. (2014). Effects of Fiscal Policy on Private Consumption: Evidence from Structural-Balance Fiscal Rule Deviations. Applied Economics Letters, 21(11), 776-781. ##Corsetti, G., A. Meier & G.J. Müller. (2012). Fiscal Stimulus with Spending Reversals. Review of Economics and Statistics, 94(4), 878-895. ##García, A. & J. Ramajo. (2005). Fiscal Policy and private Consumption Behaviour: the Spanish Case. Empirical Economics, 30(1), 115-135. ##Giavazzi, F. (1996). Pagano, M.(1995) Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience. NBER Working Paper, (5332). ##Hjelm, G. (2002). Is Private Consumption Growth Higher (Lower) During Periods of Fiscal Contractions (Expansions)?. Journal of Macroeconomics, 24(1), 17-39. ##Höppner, F. (2001). A VAR Analysis of the Effects of Fiscal Policy in Germany. Institute for International Economics. ##Hristov, A. (2013). The Effects of Fiscal Policy on Consumption in Good and Bad Times (No. 44658). University Library of Munich, Germany. ##Lane, P.R. (2003). The Cyclical Behaviour of Fiscal Policy: Evidence from the OECD. Journal of Public Economics, 87(12), 2661-2675. ##Mittnik, S. & W. Semmler. (2012). Regime Dependence of the Fiscal Multiplier. Journal of Economic Behavior & Organization, 83(3), 502-522. ##Pagan, A.R. & M.H. Pesaran. (2008). Econometric Analysis of Structural Systems with Permanent and Transitory Shocks. Journal of Economic Dynamics and Control, 32(10), 3376-3395. ##Perotti, R. (1999). Fiscal Policy in Good Times and Bad. The Quarterly Journal of Economics. vol.114, pp.1399-1436. ##Ramey, V.A. & M.D. Shapiro. (1998). Costly Capital Reallocation and the Effects of Government Spending. In Carnegie-Rochester Conference Series on Public Policy (Vol. 48, pp. 145-194). North-Holland. ##Schclarek, A. (2007). Fiscal Policy and Private Consumption in Industrial and Developing Countries. Journal of Macroeconomics, 29(4), 912-939. ##Seater, J. (1993). Ricardian Equivalence, Journal of Economic Literature 31, 142 190. ##Tagkalakis, A. (2008). The Effects of Fiscal Policy on Consumption in Recessions and Expansions. Journal of Public Economics, 92(5), 1486-1508. ##Van Aarle, B. & H. Garresten. (2003). Non-Keynesian or No Effects of Fiscal Policy Changes? The EMU Case. Journal of Macroeconomics, 25:213–240. ####Wang, L. & W. Gao. (2011). Nonlinear Effects of Fiscal Policy on Private Consumption: Evidence from China. China & World Economy, 19(2), 60-76. ##Zaghini, A. (2001). Fiscal Adjustments and Economic Performing: A Comparative Study. Applied Economics, 33(5), 613-624