Multiple Modeling of the Asymmetric Effects of Government Size on Iran's Economic Growth: A Dynamic Threshold Approach

Document Type : Research Paper

Authors

1 PhD Student in Economics, Department of Economics and Management, Islamic Azad University, Shiraz, Iran

2 Associate Professor, Department of Economics and Management, Islamic Azad University, Shiraz, Iran

Abstract

The purpose of this research is to examine how government spending shocks affect Iran's economic growth.To achieve this goal, multivariate modeling of Ram's (1986) growth patterns and Hansen's threshold regression method have been used. The threshold criteria used in this study for government size are: the ratio of government current expenditures to GDP (GS1) and the ratio of government capital asset acquisition costs to GDP (GS2). The findings of this study confirm the positive effect of government spending shocks on capital asset acquisition costs and their lack of confirmation in the area of current spending on Iran's economic growth. Also, the results indicate that the Bars (Army) curve has not been realized in the Iranian economy during the period 1961 to 2023; meaning that in none of the small, medium, and large government sizes, the relationship between government size and economic growth is negative, and we do not witness an inverted U curve in this relationship. However, this effect is faced with a decrease in efficiency and effectiveness in large government sizes. The positive side effects of government spending in the areas of current spending and capital asset acquisition on non-government sector production are another finding of this study, which is faced with a decrease in elasticity in the current spending sector from small to large government and an increase in elasticity in the capital asset acquisition sector.

Keywords

Main Subjects

References

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