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In this study, to find the relationship between the government budget deficit and trade balance in Iran, a structural macro-econometric model is set up. In the model, government consumption expenditure increased by 20 percent annually during 2001-2010, so the government budget deficit increased relative to the baseline. The financing methods of budget deficit and relevant effects on trade balance were analyzed in 4 options. The results indicate that government budget deficit increases by adopting expansionary fiscal policy in all options. If the budget deficit is financed by borrowing from the central bank (the first option), it will raise the monetary base and finally worsen the trade balance and non-oil trade balance compared to the baseline.  If the budget deficit is financed by selling participation bonds to the public (the second option), it will reduce aggregate demand and finally improve the trade balance and non-oil trade balance compared to the baseline. If direct taxes and government spending are increased by the same amount (the third option), private consumption will decrease; and trade balance and non-oil trade balance will be deteriorated compared to the baseline. Finally, if the budget deficit is financed by the withdrawal of foreign currency reserves (the fourth option), oil revenues will increase, as a result the trade balance will be improved and the non-oil trade balance will be exacerbated compared to the baseline.  

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In this study, the allocation of resources of National Development Fund (NDF) to economic sectors in foreign currency and Rial is evaluated by making a structural macro-econometric model that expresses the reality of Iran’s economy as much as possible. This model consists of 45 behavioral equations, 28 connecting equations and 88 identities. Behavioral equations are estimated by the ARDL approach in Eviews 9 software using annual data from 1959 to 2014. According to Theil’s U statistic and root mean square error (RMSPE), the simulation of endogenous variables indicates that model gives a good explanation of Iran’s economy mechanism. Regarding different scenarios for how to allocate resources of National Development Fund to different economic sectors, simulation results over the 2011-2014 period show that if 80% of NDF’s resources is distributed in proportion to the share of sector's investment in total investment in foreign currency and remaining 20% is allocated equally to agriculture and industry sectors in Rial, the highest rate of economic growth will be realized.