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Investigating the Effects of Government Expenditures on Welfare in Iran: Application of Dynamic Stochastic General Equilibrium Models
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Abstract: (5085 Views) |
Output and welfare are among the most important economic indicators used in the assessment of economic performance. One of the reasons is that these variables have broad interactions with other variables. For this purpose, a dynamic stochastic general equilibrium model is designed for the Iranian economy. In this research, after design, linearize and calculating the model coefficient, the impulse response function is used to evaluate effects of consumption expenditures and government capital shock, as well as oil revenues and monetary impulse. The comparing the variables' moments with the realized data show the relative success of the model in the simulation of economic variables such as production data, inflation, and consumption. The results show that the positive shock on consumption expenditures and government investment increase the production and reduce the consumption in the Iranian economy. Also, this process is accompanied by a crowding out effect. An oil revenue's shock leads to increase inflation by increasing the liquidity variable. In other sides, its positive effect on production rapidly vanishes, and the production trend returns to its equilibrium value. However, inflationary effects of oil revenue shock disappear later. Meanwhile, the oil revenue's shock increases the consumption and investment of the private sector. In addition, regarding the effect of financial policies on welfare, the results show that Lagrange's coefficient is equal to 34 if the current policies are going on, and the coefficient is equal 1.95 if the optimal policy is running. In other words, the adoption of optimal policies in government spending can increase economic welfare.
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| Keywords: Dynamic stochastic general equilibrium model, Government expenditure, welfare |
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Full-Text [PDF 1930 kb]
(2256 Downloads)
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Type of Study: Research |
Subject:
Special
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