Impacts of Governments Fiscal Policies on Value Added of Agriculture and Industrial Sectors

The objective of this study was to investigate the impacts of government expenditure on value added of agricultural and industrial sectors. To achieve the objective, Vector Autoregressive approach, causality analysis and Impulse Response Function analysis were used. The data collected from different sources including Iranian Statistical Center and Central Bank. Results of the study showed that causality is from government expenditure to agriculture value added, indicating positive impact of government expenditure on agricultural value added in the short run. It was also found that in short run government expenditure affects value added, export and investment of the industrial sector positively and significantly. Given the positive impact of the government expenditure on investment in agriculture, in both short and long-run, it is concluded that government expenditure in infrastructures results in improved transportation system which in turn, encourage more investment in agricultural sector.