The effect of oil shocks on the relationship between income - government expenditure in Iran And challenges of management and impulse control

Abstract Unexpected changes in oil prices on international unstable markets, impact on economic development (Due to budget dependence on oil and the high proportion of government in the economy). Financial management and economic planning in applying a policy, always consider other conditions constant but in action, macro-economic variables such as income and government expenditure are affected by unexpected internal and external shocks and this factor impairs economic development and the effectiveness of the policies intended are disrupted. Therefore, Iran's official policy has always been faced with the challenge of managing the oil income shocks. Considering the importance, in this study, by using models of TVP and TVPFAVAR, using software econometric MATLAB and EViews and using quarterly data over the period 1367 to 1394 has been paid to the effects of the oil shock on the relationship of income - expenditure the Iranian government. Considering that, the exchange rate is a channel for oil income to the economy, the effect of exchange rate shocks is estimated this relationship. Based on the results, oil income shocks increase the relationship of income - government spending. This means that oil shocks increase government expenditure in each period. However, the effects of increasing it during, is decreasing. Also, government spending relative to negative income shocks, was inflexible. Thus, the dependence of the budget oil revenue, through time, has not diminished. As a result, it is proposed that: managers and government policy makers, to improve the relationship between income and expenses, Avoid from policies of discretionary and temporary treatment and take action to prevent and systematic policies. Also, exchange rate shocks have caused the relationship between income and expenditure, reduced. In other words, the increase in the exchange rate through time is not a revenue source for the government to finance its expenditure.