Analyzing Iranian Government Fiscal Stability through Multicointegration

Present fiscal policy progression will pave the way for the government's debts repayment if the government is in the fiscal stability condition. This paper tries to test Iranian government's fiscal stability on the basis of 1971-2008 data, using multicointegration method. In this method, it is possible to study the cointegration relationship of variables with different accumulation rank order. This study indicates that the government is not in a stable fiscal status in the public budget scale. But if seigniorage is added to the government's revenues, it would result in fiscal stability status. This indicates that Iran's fiscal policy could repay government's debts just through relying on inflation.