The Nonlinear Relationship Between the Uncertainty of Government Economic Policies and Economic Growth of Iran with Emphasis on the Development of Financial Markets in a Novel Gas Model Framework

Document Type : Research Paper


1 Faculty of Economics and Managementو Urmia University, Urmia, Iran.

2 Faculty of Economics and Management, Urmia University, Urmia, Iran.


The main purpose of the present study is to investigate the effect of government economic policy uncertainty on economic growth in terms of the development of financial markets during the period 1978-2018 in the framework of a nonlinear model. To estimate the uncertainty, the novel Generalized Autoregressive Score model, and to estimate the effect of government expenditures uncertainty on economic growth in terms of capital market development, the Smooth Transition Autoregressive model has been used. The results of this study show that the government spending uncertainty in the first regime (low levels of investment) has a negative impact and in the second regime (high levels of investment) has a positive effect on economic growth. In the first regime, with the development of the capital market, the negative impact of uncertainty on economic growth has been neutralized. While in the second regime, the development of the capital market has not been able to maintain the positive effect of uncertainty on economic growth and the uncertainty of government spending in terms of capital market development has a negative impact on economic growth. As a result, the country's capital market is unable to take advantage of high levels of investment to reduce government uncertainty on economic growth.


Main Subjects

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