An Analysis of the Terence Effect and the Anti-Tensile Effect in Iran's Economy: Discrete Wavelet Transform Method and a Threshold Vector Autoregressive Model

Document Type : Scientific paper

Authors

1 PhD student, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran

2 Associate Professor, Department of Economics, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran

3 Professor, Department of Economics, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran

Abstract

Inflation affects the state budget in both ways. Inflation, on the one hand, decreases the purchasing power of tax revenues, which is known as the tension effect. On the other hand, the inflationary burden of government expenditures and its obligations actually decreases, which is known as an antithetical effect. Meanwhile, it should be noted that inflation also affects the budget deficit of the state. In the present study, using a discrete wavelet converter with maximum matching and a vector of autoregressive vector autoregression, the interaction effects of inflation and deficit of government in two cases of deficit and total deficit in the economy of Iran in 1396: 1369: 1 is reviewed from a new angle. Results based on the wavelet converter show that in horizons for more than 8 years, the causal relationship is between the two types of budget deficit with bilateral inflation. Based on the results of the estimation of the autumnal regression model, the threshold vector in seasonal inflation is less than 5.7% of the total budget deficit in the face of inflationary swings, which reflects the dominance of the anti-tensile effect of the Tensi Is. In addition, the operating deficit, regardless of the situation, is from the threshold of positive reaction to the swing momentum.

Keywords

References

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Macroeconomics Research Letter
Volume 15, Issue 29
August 2020
Pages 13-37

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History

  • Receive Date: 07 August 2019
  • Revise Date: 05 February 2020
  • Accept Date: 22 February 2020

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