Validity of Wagner's law and the Keynesian View for the Iranian Economy A Time Series Analysis

The objective of this paper is to investigate the validity of Wagner’s law and the Keynesian view with regards to the relationship between the non-oil gross domestic product and the public sector size for the Iranian economy during the period of 1967-2007. Time series analysis techniques have been used which include unit root tests, cointegration tests and Hsiao causality test. The findings indicate that Wagner’s Law is confirmed in both the short-run and the long-run; whereas the Keynesian view is approved only in the short-run for Iran.