Dynamic Effects of Total Debts on Economy of Iran: Bayesian Approach

In this study the dynamic effects of the total debt on the real sector was analyzed during the period of 1981-2011. We use the non-classical econometric model BVAR and the simulation scenarios defined. We study the scenarios that reduce total debt to near zero، total liabilities decreased to half the initial value، and increased total debt to double in the Bayesian model. The results show that the total volume of debt had been affected on the real sector of the economy as an increase in total liabilities at first، through an create Account and increasing in the supply of credit and liquidity led to increase in economic growth where can have a positive effect on real output. Although، the influence of these variables has a negative impact on gross domestic investment and real sector of the economy.