Constructing Government Time Series Debts and Estimating of the Optimal Ratio of Government Debt to Gross Domestic Product and Financial Space in Iran Economy

Lack of reliable statistics relating to government debts in Iran's economy, not only has it influenced on the optimal management of resources and debt, but it has been one of the most important factors affecting the lack of theoretical and experimental literature in this field in Iranian economy; Somehow that he existence of extensive international literature in world, has led to very limited studies in Iran. In this study, the time series of government debt are calculated in four ways. Furthermore, this article has two ways to calculate the optimal ratio of government debt to gross domestic product, and then estimate financial space in Iran economy. In first way, without time series of government debts and based on a simple model this proportion was estimated at 15%. Despite the advantage of this method of not using the time series of debt due to the adoption of some assumptions that are inconsistent with the conditions of the Iranian economy, we cannot accept it easily. Therefore, the second method was investigated, in which first government debt series has been set up and then, using a smooth transition regression, the government's debt ratio was extracted which was 19 percent. Estimates performed in two ways, the highest government debt ratio has been experienced and the ratio of government debt that leads to negative economic growth, show that the government has a fiscal space to 30 or 32 percent of the government debt to GDP ratio.