Determination of the Optimal Level of Government Budget Components: Stochastic Optimal Control Algorithm Approach

Government budget is an important policy-making tool to achieve allocation, distribution and stabilization goals that affect the economic performance of society through variables of government expenditures and revenues; accordingly, determining the optimal level of budget components is always important for the policy-making system. Therefore, the purpose of the current study is to assess the optimal level of government budget components for the period of the Sixth Economic, Social and Cultural Development Plan. To do so, the random optimal control approach was used in which the control amounts include tax revenues, government's consumption expenditures, government's acquisition of non-financial assets and liquidity. The result of this study shows optimal tax revenues, non-tax revenues, government's current payments, and government's acquisition of non-financial assets is less than the sixth plan amount and secondly, the largest gap between the optimal amounts and the amount of the Sixth Plan is related to government's acquisition of non-financial assets.