Evaluating the effects of fiscal policy (changes in the Tax Income) on the employment in Iran

Due to the impact of Government’s fiscal policy on macroeconomic variables, awareness of short-run and long-run impacts of these policies need to be applied in order to anticipate their consequences and appropriate policies. We will investigate the effects of fiscal policy (changes in the Tax Income) on the employment in Iran by using Vector Auto Regressive, Impulse Response Function and Variance Decomposition and also the short-run and long-run relationships between variables will be evaluated. For this purpose, the time series data for the years 1350 to 1391 were used to estimate the model. According to the long- run equations and coefficients that are significant, we can say that there is a long-run equilibrium relationship between increasing in taxes and employment and during the period of study, rising taxes had a negative impact on employment.