The Impact of Government Spending Policy Uncertainty on the Real Sector of the Economy in Recession and Boom Regimes

The purpose of this article is to investigate the impact of government spending policy uncertainty on the real sector of the economy in recession and boom regimes using the rotation model and Markov switching regime change in the period from 1365 to 1399. Considering the importance of the effect of economic policies and the uncertainty of the government's spending policy on the real variables of the economy such as production and employment; Clarifying the relationship between the uncertainty of the government's spending policy and economic activities can open the way for the country's macro-planning. The findings showed that the uncertainty of current and construction expenditures, oil, monetary and currency shocks, financial crisis, and sanctions in recession conditions cause a decrease in GDP and employment. In addition to this, the duration of production stagnation and boom period is 20 and 15 years, respectively, and these values for employment are 21 and 14 years, respectively. Therefore, the rate of permanence during Iran's recession has a high probability. These factors increase the risk of investing in Iran and lead to a decrease in production and employment.Key words: uncertainty, government spending, Markov switching regime change model, Recession and boomJEL Classification: C24, G32, G19.