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:: Volume 22, Issue 69 (Quarterly Journal of Economic Research and Policies 2014) ::
qjerp 2014, 22(69): 131-150 Back to browse issues page
Government Size and Economic Growth in Iran: A Smooth Transition Approach
Firouz Fallahi * , Jalal Montazeri Shoorkchali
University of Tabriz , ffallahi@tabrizu.ac.ir
Abstract:   (15480 Views)
In this paper we study the existence of the Armey curve in Iran, which states that there is an inverted U-shaped relationship between the government size and the economic growth. To that end, we use quarterly data during 1988:1-2008:2. Instead of relying on a binomial model, which is very popular in the literature, we use a smooth transition regression (STR). STR models are very flexible, and binomial models are considered as a special case of the STR models. The results show that there is a nonlinear connection, i.e., a threshold effect, between the government spending and the growth rate in the Iran's economy. The threshold level of government size is 14.29% of the GDP. However, we cannot confirm the existence of Armey curve in the Iran's economy because the relationship is negative in the first regime (before the threshold) and it is positive in the second regime. In other words, the link between the government size and economic growth is U-shaped in Iran.
Keywords: Government Size, Economic Growth, Smooth Transition Regression, Armey Curve, Non-Linear Model.
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Type of Study: Research | Subject: Special
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fallahi F, Montazeri Shoorkchali J. Government Size and Economic Growth in Iran: A Smooth Transition Approach . qjerp 2014; 22 (69) :131-150
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Volume 22, Issue 69 (Quarterly Journal of Economic Research and Policies 2014) Back to browse issues page
فصلنامه پژوهشها و سیاستهای اقتصادی Journal of Economic Research and Policies
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