Comparative Analysis of The Effects of Financing Government Budget Deficits Through General Murabaha Bills Versus Borrowing From The Banking System on Economic Growth And Inflation Variables Using The Bayesian Vector Autoregression (BVAR) Method

Articles in Press

Document Type : Research Paper

Authors

1 university professor

2 Member of Economic Department /Faculty of A ministrative Sciences and Economics/ University of Isfahan

3 Director of Isfahan Program and Budget Organization

4 Ashrafi University of Isfahani

10.22034/ecoj.2025.65051.3381

Abstract

Multiple tools have been designed and implemented to offset government budget deficits and to finance both government-owned and private enterprises. Addressing budget deficits and devising sound solutions for their financing, based on economic principles, are of paramount importance. Hence, this study compares the impact of two methods general Murabaha bills and borrowing from the banking system on economic growth and inflation. The research model for analyzing growth is derived from the Solow-Swan growth theory. The research method employed, considering the interrelationships between variables and the constraint of the issuance period of debt securities, is bayesian vector autoregression, utilizing monthly data from 2019 to 2022. The results indicate that initially, the issuance of general Murabaha bills leads to a reduction in economic growth rates, but they increase in subsequent periods. Moreover, an increase in government debt to the banking sector leads to a decrease in economic growth rates. The effect of general Murabaha bills on inflation rates is initially positive but decreases after a few periods. Overall, the impact of general Murabaha bills on inflation is greater than the impact of government debt to the banking sector.

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Quarterly Journal of Applied Theories of Economics

Articles in Press, Accepted Manuscript
Available Online from 07 May 2025

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