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:: Volume 29, Issue 98 (Quarterly journal of economic research and policies 2021) ::
qjerp 2021, 29(98): 289-326 Back to browse issues page
08 The Effect of Tax Evasion On Monetary Rule Under Fiscal Dominance and Liquidity Constraint: The Case of Iran
Babak Choobineh , Ali Hosein Samadi * , Ebrahim Hadian , Zahra Dehghan Shabani
Shiraz University , asamadi@rose.shirazu.ac.ir
Abstract:   (1980 Views)

In Iran, due to tax evasion, the government is not able to fully realize its potential tax revenue and usually face budget deficit. On the other hand, the central bank does not have enough independence. In this study, first, the monetary rule was calculated by optimizing the central bank's loss function by considering fiscal dominance and tax evasion. The derived rule responds to government deb in addition to inflation and GDP. Parameters have been calculated in the framework of dynamic stochastic general equilibrium model using Bayesian method based on data 2002-2017. We find that despite the fiscal dominance and liquidity constraints, tax evasion can act as a buffer layer for economic agents against economic shocks like government expenditure, oil revenue and technology but tax evasion is lead to greater volatility of economic variables. As a result, social welfare is decreased stronger while under fiscal dominance and absence of tax evasion, optimal monetary rule is impossible.
 
Keywords: Optimal Monetary Rule, Fiscal Dominance, Institution Quality, Informal Sector, Budget Constraint Of GOVERNMENT
Full-Text [PDF 1434 kb]   (628 Downloads)    
Type of Study: Research | Subject: Special
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choobineh B, Samadi A H, Hadian E, Dehghan Shabani Z. 08 The Effect of Tax Evasion On Monetary Rule Under Fiscal Dominance and Liquidity Constraint: The Case of Iran. qjerp 2021; 29 (98) :289-326
URL: http://qjerp.ir/article-1-2581-en.html


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Volume 29, Issue 98 (Quarterly journal of economic research and policies 2021) Back to browse issues page
فصلنامه پژوهشها و سیاستهای اقتصادی Journal of Economic Research and Policies
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