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The Nonlinear Relationship Between the Uncertainty of Government Economic Policies and Economic Growth of Iran with Emphasis on the Development of Financial Markets in a Novel Gas Model Framework

Author

Listed:
  • Bagherzadeh Azar, Fateme

    (Ph.D. of Economics, University of Tabriz)

  • Mohseni Zonouzi, Seyyed Jamaledin

    (Associate Professor of Economics, Urmia University)

  • Mansourfar, Gholamreza

    (Associate Professor of Accounting, Urmia University)

Abstract

The main purpose of the present study is to investigate the effect of government economic policy uncertainty on economic growth in terms of the development of financial markets during the period 1978-2018 in the framework of a nonlinear model. To estimate the uncertainty, the novel Generalized Autoregressive Score model, and to estimate the effect of government expenditures uncertainty on economic growth in terms of capital market development, the Smooth Transition Autoregressive model has been used. The results of this study show that the government spending uncertainty in the first regime (low levels of investment) has a negative impact and in the second regime (high levels of investment) has a positive effect on economic growth. In the first regime, with the development of the capital market, the negative impact of uncertainty on economic growth has been neutralized. While in the second regime, the development of the capital market has not been able to maintain the positive effect of uncertainty on economic growth and the uncertainty of government spending in terms of capital market development has a negative impact on economic growth. As a result, the country's capital market is unable to take advantage of high levels of investment to reduce government uncertainty on economic growth

Suggested Citation

  • Bagherzadeh Azar, Fateme & Mohseni Zonouzi, Seyyed Jamaledin & Mansourfar, Gholamreza, 2020. "The Nonlinear Relationship Between the Uncertainty of Government Economic Policies and Economic Growth of Iran with Emphasis on the Development of Financial Markets in a Novel Gas Model Framework," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 7(2), pages 103-128, August.
    • Handle: RePEc:ris:qjatoe:0190
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    Citations

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    Cited by:

    1. Botshekan , Mohammad Hashem & Takaloo , Amir & H. soureh , Reza & Abdollahi Poor , Mohammad Sadegh, 2021. "Global Economic Policy Uncertainty (GEPU) and Non-Performing Loans (NPL) in Iran's Banking System: Dynamic Correlation using the DCC-GARCH Approach," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 16(2), pages 187-212, June.

    More about this item

    Keywords

    Government Expenditure Uncertainty; Capital Market Development; Generalized Autoregressive Score model; Smooth Transition Autoregressive Model.;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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