Investigating The Nature of Keynesian or non-Keynesian effect of fiscal policy on Private Consumption: An Application of the Asymmetric-TVAR model

Document Type : Research Article

Authors

Faculty of Economics and management, Urmia University

Abstract

Giavazzi and Pagano 1996 and Perotti 1999 noted that the impact of fiscal policy on the consumption of the private sector varies in different economic conditions, and the most important factors influencing the consumption of the private sector can be named as the state of the economy in terms of recession or boom, as well as the amount of government debt. After the above-mentioned studies, the hypothesis of nonlinear fiscal policy effect on the private consumption was examined in different aspects.  . This study was also aimed at evaluating the subject matter of the study about the Keynesian or non-Keynesian nature of the fiscal policy using seasonal data for the Iranian economy during 1369-1395. In order to study the subject, non-linear integration and co-integration tests (STAR), nonlinear causality test (TGC) and asymmetric threshold vector autoregressive model have been used. The results of integration, co-integration and nonlinear causality tests showed that the co-integration and causality relationship of the variables follow a nonlinear process and the degree of integration of some of the variables used also has a nonlinear process. On the other hand, the results of the asymmetric threshold vector auto regression model showed that the taxes and the current government expenditures in the Iranian economy have Keynesian nature. But the government's current spending shows a non-Keynesian nature during the recession and has a Keynesian's nature during boom. Also, in terms of positive, negative, small and large shocks, it was also found that asymmetry exist in how fiscal policy shocks affect the consumption of the private sector during business cycles.

Keywords

References

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Journal of Applied Economics Studies in Iran
Volume 8, Issue 29
May 2019
Pages 157-183

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