The Empirical Analysis of the Effect of Fiscal Policies Shocks on Trade Balance in Iran (The Application of Structural VAR)
Trade balance influences macroeconomic indicators such as exchange rate and national income. The continuous positive balance leads to more entrance of currency and increasing GNP and also, continuous negative balance leads to outflow of currency and decreasing GNP. The fiscal policy tools and government budget situation can be effective on trade balance. In this paper, the effect of shocks from government expenditures and taxes on trade balance in Iran has been studied empirically using structural vector autoregressive regression (SVAR) method. The results from estimated model show that i) there is a negative and significant relationship between shocks from government expenditures and trade balance in Iran. This finding indicates that a positive shock from government expenditures will get worse the status of trade balance ii) the positive and significant relationship between trade balance and tax burden is confirmed that show more tax burden improve trade balance through limit import.
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