Volume 19, Issue 1 (2019)                   QJER 2019, 19(1): 105-128 | Back to browse issues page

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gholami E. The Choice of the Best Tax Base to Finance Fiscal Stimulus Programs in Iran Using a Dynamic Stochastic General Equilibrium Model. QJER 2019; 19 (1) :105-128
URL: http://ecor.modares.ac.ir/article-18-15348-en.html
Assistant Professor , Economics group, Department of Management and Economics, Tehran Science and Research Branch, Islamic Azad University ,Tehran, Iran , elham_gholami4@yahoo.com
Abstract:   (9102 Views)
The application of fiscal stimulus programs (FSPs) to achieve economic growth requires knowing the source of its funding, because different methods and various taxation bases for financing of the FSPs affect their effectiveness and influence the economy. The objective of this paper is to choose the best tax base to finance FSPs in Iran, according to the lowest distortionary effects on efficiency of increasing government spending. For this purpose, first a dynamic stochastic general equilibrium (DSGE) model is designed for Iran. The model consists of three economic factors including the household, domestic firms, and the government as fiscal and monetary authority, and its reliability is checked through the calibration procedure. Then, the multiplier of government spending is estimated within four scenarios for financing government spending. These include the application of tax on income, tax on consumption, a combination of tax on income and tax on consumption (value added tax) and the budget deficit policy. The results show that taxation compared to a budget deficit policy results in decreasing efficiency of the government's fiscal stimulus. However, the reaction of domestic production to the increase in government spending indicate that while a tax on consumption may cover government spending, it has a low negative effect on the efficiency of this fiscal stimulus.
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Article Type: Original Research | Subject: Economics
Received: 2017/05/8 | Accepted: 2018/07/7 | Published: 2019/03/17

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