The Impact of Oil Shocks on Government Expenditure Components and Tax Revenues in Iran

Document Type : Scientific paper

Authors

1 Doctoral student of economic sciences, Faculty of Economic and Administrative Sciences, Mazandaran University, Babolsar, Iran

2 Associate Professor of Economics, Faculty of Economics, University of Mazandaran

3 Professor of Economics University of Mazandaran

Abstract

The present research investigated the effects of oil revenue shocks on the constituent components of the government's expenditures from 1990/04 to 2018/04 and tax revenues from 1993/01 to 2018/04 in Iran. In this regard, time-varying parameter generalized vector autoregression (TVP-VAR) models were used to consider the structural instability in the parameters. Based on the results obtained from the first research model, the impact of oil income impulses on defense expenditure was estimated to be positive. However, the said effect quickly disappeared in the later periods. Therefore, it can be explained that the impact of oil revenue impulses on government defense expenses was temporary. The effect of impulses on economic and social affairs expenditures was also estimated to be positive. Moreover, it was revealed that the impact of oil income impulses on public affairs expenses was initially positive, but it gradually decreased and reversed in later periods. The results of the second research model, in which the impact of oil revenue shocks on direct and indirect tax revenues was investigated, revealed that the effect of oil revenue impulses on direct tax revenues from the positive range was quickly placed in the negative range. On the opposite point, the impact of oil income impulses on indirect taxes started from the negative range and then quickly moved to the positive range. In addition, the impact of oil revenue impulses on indirect taxes can be considered positive.

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References

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Macroeconomics Research Letter
Volume 18, Issue 37
December 2023
Pages 113-137

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History

  • Receive Date: 12 July 2023
  • Revise Date: 15 December 2023
  • Accept Date: 01 January 2024

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