ASSESSING FISCAL SUSTAINABILITY OF GOVERNMENT IN IRAN

This paper investigates the sustainability of fiscal process in Iran. For fiscal process to be sustainable, government's intertemporal budget constraint should be satisfied.In this paper, we have assessed sustainability condition for period 1964-2007, using cointegration tests. The model is based on Bohn (1998) and the Barro's tax smoothing model (1986). This model is modified for an oil-producing country, noticing that oil income has comprised a large part of government income in Iran.Results show that fiscal process is not sustainable in Iran. The sustainability of the fiscal process is also compared in two periods, before and after the revolution.The estimated coefficients of the model indicate that the fiscal sustainability condition has become worse after the revolution