Optimal Fiscal Policy in the Framework of Dynamic Programming

Due to the bad effects of natural resource revenues on the economy of Petroleum Exporting Countries، it seems that it is necessary to rule out that from their public budget gradually and reduce oil income dependency. For this purpose، the best alternative is tax revenues. So، an optimal path for tax revenues to achieve this goal is needed. In this study، the optimal path is derived for the taxes by using Bellman equations. The resulting paths are different for each country depending on economic conditions. But we can say that one of the most important factors in determining this path is the level of government expenditure and its growth in the future. In other words، the growth of tax revenues and the slope of optimal path depend on the government expenditures. Finally، as an application for this model، the tax optimal path is derived for Iran، so that it is possible to finance government expenditures by taxes in 1404 vision.