Investigating the Impact of Fiscal Policies on the Composite Index of Economic Well-being in Iran, Using the SVAR Approach

Subject Areas : Management

Houra Rafiee ¹ , Kambiz Peykarjou ² , Farzaneh Hajihassani ³

1 - Department of Economics, SR.C., Islamic Azad University, Tehran, Iran.
2 - Department of Economics, SR.C., Islamic Azad University, Tehran, Iran.
3 - Department of Economics, SR.C., Islamic Azad University, Tehran, Iran.

Received: 2025-05-14 Accepted : 2025-09-01 Published : 2025-09-12

Keywords: Structural Shock, Uncertainty, Composite Welfare Index, Fiscal Policies. ,

Abstract :

The study of the Iranian economy shows that the economic growth, development and welfare index has been accompanied by many fluctuations and that different periods of monetary and fiscal policy shocks in the Iranian economy are inevitable and have affected welfare indicators. Accordingly, the main objective of the present study is to investigate the effect of structural shocks of fiscal policy uncertainty on the welfare index. The present study is quantitative. The statistical sample of the present study is data related to the Iranian economy from 2011 to 2022. The data collection tool is the use of data related to the time series of variables in the Central Bank database. The structural vector autoregression (SVAR) model has been used to analyze the data. The results showed that the structural shock of changes in tax revenues has a significant effect on the composite index of economic welfare in Iran. Tax revenues lead to an increase in economic welfare in the long run. The structural shock of changes in government spending has a significant effect on the composite index of economic welfare in Iran. If changes in government spending are spent on the development budget, they will lead to economic welfare, and if they are spent on the current budget, they will lead to a decrease in economic welfare.

References:

Abdollahi Arani Mosab, Ghasemi Mohammad Reza, Safakish Mohammad. (2017). Studying the impact of monetary and fiscal policy shocks on the Iranian industrial sector: 2004-2016 SVAR approach Quarterly Journal of Planning and Budgeting 2017; 22 (3). 109-140. 20.1001.1.22519092.1396.22.3.1.0
Aloudari, Qasem, Moghadam, Javad, Rezvanifard, Saeed, Moghadam, Mehdi. (2016). Investigating the Simultaneous and Dynamic Relationship between Trading Volume and Stock Returns Using Vector Autoregression Models, Nei Publishing.
Amiri, Hossein, and Pirdadeh Beiranvand, Mahboobeh. (2017). The Effect of Monetary Policy Instruments on Inflationary Stagnation in Iran. Applied Economics, 7(21), 19-32. 10.22059/ier.2013.73500
Andrade, C., Gillen, M., Molina, J. A., & Wilmarth, M. J. (2022). The social and economic impact of Covid-19 on family functioning and well-being: Where do we go from here?. Journal of Family and Economic Issues, 43(2), 205-212. DOI: 10.1007/s10834-022-09848-x
Anvari-Clark, J., & Ansong, D. (2022). Predicting financial well-being using the financial capability perspective: The roles of financial shocks، income volatility، financial products، and savings behaviors. Journal of Family and Economic Issues, 43(4). 730-743. 10.1007/s10834-022-09849-w
Baker، A. (2018). Macroprudential regimes and the politics of social purpose. Review of international political economy, 25(3), 293-316. https://doi.org/10.1080/09692290.2018.1459780
Barkhodhari, Sajjad, and Foroughifar, Mohsen. (2019). Regional Dynamic Effects of Monetary Policy on Employment in Iran (TVP-FAVAR Approach). Applied Theories of Economics, 6(4), 109-136. https://doi.org/10.30473/egdr.2019.43550.5013
Bo, H., Lensink, R., & Sterken, E. (2003). Uncertainty and financing constraints. Review of Finance, 7(2). 297-321. DOI: 10.1023/A:1024570312059
Bufe, S., Roll, S., Kondratjeva, O., Skees, S., & Grinstein-Weiss, M. (2021). Financial shocks and financial well-being: what builds resiliency in lower-income households?. Social Indicators Research، 1-29. DOI: 10.1007/s11205-021-02828-y
Cristea, M., Georgiana Noja, G., Dănăcică, D. E., & Ştefea, P. (2020). Population ageing، labour productivity and economic welfare in the European union. Economic research-Ekonomska istraživanja, 33(1), 1354-1376. https://doi.org/10.1080/1331677X.2020.1748507
Dizji. (2021). Analysis of Social Welfare in Iran with Emphasis on Human Development from the Perspective of Economic Sociology. Sociological Studies, 14(51), 49-66. ‎ 10.22111/sedj.2022.40421.1156
Ghalibaf Asl, Hassan. (2017). Studying the effect of exchange rate on firm value in Iran, Master of Management thesis, Faculty of Management, University of Tehran. DOI: 10.30699/ijf.2021.123045
Grier, S. A., Crockett, D., Johnson, G. D., Thomas, K. D., & Bradford, T. W. (2023). RACE IN CONSUMER RESEARCH: PAST, PRESENT, AND FUTURE. Journal of Consumer Research. DOI: 10.1093/jcr/ucad050
Gulen, H., & Ion, M. (2016). Policy uncertainty and corporate investment. The Review of Financial Studies, 29(3), 523-564. https://doi.org/10.1093/rfs/hhv050
Hafezian, Farideh, Zamanian, Gholamreza, and Shahraki, Javad. (2022). The Effect of Financial Development on the Balance Sheet Channel of Monetary Policy Transmission. Applied Theories of Economics, 9(2), 245-264. 10.22034/ecoj.2022.46269.2887
Heydari, Hassan., Shirkvand, Saeed and Abolfazli, Seyed Ramin (2015), Investigating the Simultaneous Effects of Oil Price and Gold Price Uncertainty on the Tehran Stock Exchange Price Index: Based on the Three-Variable GARCH Model, Journal of Financial Engineering and Securities Management, No. 22, 61-80.
Khodadadi, Farideh, and Samsami, Hossein. (2022). Evaluating the Effectiveness of Indirect Monetary Policy Instruments under Fractional Reserve Banking: The DSGE Approach. Applied Theories of Economics, 9(2), 89-122. 10.22034/ecoj.2022.49612.2990
Li, Q., Maydew, E. L., Willis, R. H., & Xu, L. (2022). Corporate tax behavior and political uncertainty: Evidence from national elections around the world. Journal of Business Finance & Accounting, 49(9-10). https://ssrn.com/abstract=2498198
Mahdiloo, Ali, Asgharpour, Hossein, and Fallahi, Firouz. (2018). Nonlinear Estimation of the Role of Monetary Policy Transmission Channels in the Iranian Economy: MS-VAR Approach. Monetary and Banking Research, 11(37), 319-354. http://qjerp.ir/article-1-2036-en.html
Meier, S., Gonzalez, M. R., & Kunze, F. (2021). The global financial crisis، the EMU sovereign debt crisis and international financial regulation: lessons from a systematic literature review. International Review of Law and Economics, 65, 105945.
Parvin, Soheila, Abbas Shakeri, and Azam Ahmadian (2014), “An Analysis of the Impact of Banking System Balance Sheet Shocks on Output and Inflation in the Iranian Economy”, Quarterly Journal of Economic Research, 14(1): 186-149.
Patel, R. J., Gandhi, D. J., Patel, M. K., & Modi, T. M. (2023). Integration of bond markets and portfolio diversification: Evidence from the 2008 global financial crisis. Indian Journal of Finance, 17(4), 27-44.
Phan، D. H. B., Sharma، S. S., & Tran، V. T. (2018). Can economic policy uncertainty predict stock returns? Global evidence. Journal of International Financial Markets, Institutions and Money, 55, 134-150.
Raei, Reza, Irvani, Mohammad Javad, and Ahmadi, Tirdad. (2018). Monetary shocks and monetary policy transmission channels in the Iranian economy: with emphasis on the exchange rate, housing price and credit channels. Economic Growth and Development Research, 8(31), 29-44. https://doi.org/10.22067/mfe.2022.68688.1027
Ramirez, J. C., Ortiz-Arango, F., & Rosellon, J. (2021). Impact of Mexico’s Energy Reform on Counsumer Welfare. Utilities Policy, 7, 1-10.
SAMATI, M. (2021). The effect of fiscal policy on social welfare due to government spending shocks، monetary and productivity. Journal of Economic Research and Policies, 29(97). 199-225. 10.52547/qjerp.29.97.199
Sharpe, A. (2021). The Index of Economic Well-being for New Brunswick, 1981-2019 (No. 2021-08). Centre for the Study of Living Standards. DOI: 10.1007/978-94-007-0753-5_1403
Vafaei, Mohammadzadeh, Fallahi, Firouz, & Asgharpour. (2017). Investigating the Convergence of Social Welfare in Iranian Provinces Using the Nonlinear Star Space Technique. Applied Theories of Economics, 13(4), 79-102. 10.22080/iejm.2023.23976.1929‎
Zhang, J., Wang, C. M., Liu, L., Guo, H., Liu, G. D., Li, Y. W., & Deng, S. H. (2014). Investigation of carbon dioxide emission in China by primary component analysis. Science of the total environment, 472, 239-247. DOI: 10.1016/j.scitotenv.2013.11.062