Analysis of causal relationships between entrepreneurship ,unemployment and economic growth in Iran

The purpose of this study was to investigate the causal relationships between entrepreneurship development, economic growth and unemployment by Vector Auto Regression (VAR) and to investigate the effects of shocks on these variables in Iran. For this purpose, seasonal time series data from 2006-2016 and Global Entrepreneurship Index (GEI) and Central Bank of Iran (CBI) were used. The findings of Granger causality test show that a bilateral causality between economic growth and unemployment and a unidirectional causality from economic growth to entrepreneurship index were confirmed and there was no causality relation between entrepreneurship and unemployment in spite of correlation among them but, a third variable, GDP, is the cause of changes in both variables. According to analysis of impulse-response functions, only the shocks caused by entrepreneurship index are enduring in the model. Also, according to the result of variance decomposition, among three variables, the largest share in entrepreneurship changes is related to the entrepreneurship index itself. Therefore, it can be stated that only entrepreneurship policies can improve the component of entrepreneurship index.