The Impact of the Economic Policy Uncertainty on the Entrepreneurship and Unemployment in Iranian Economy, Simultaneous Equations System Approach

Uncertainty in regard to economic policy causes the economic actors not to be able to sketch a clear vision of their future. Therefore increasing economic policy uncertainty causes reduction of investment in productive sectors of the economy, the economic recession and increases unemployment rate. Economic recession together with pessimistic views on the pace of economic recovery limits expected successful entrepreneurship. In this study, the impact of the economic policy uncertainty on the unemployment and entrepreneurship in Iranian economy is evaluated during the period of 1345-1395 by using a Simultaneous Equations system and GMM method. The results of this studyshow that the increase of economic policy uncertainty (in terms of financial, monetary and income policies) increases unemployment rate, while the increase of economic policy uncertainty (in terms of financial, exchange and income policies) reduces rate of entrepreneurship. Accordingly, we can suggest that the government should reduce unemployment and increase entrepreneurship through greater policy transparency and stability, and also reducing economic policies uncertainty.