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Estimating the Degree of Fiscal Dominance and its Welfare Costs in a Dynamic Stochastic General Equilibrium (in Persian)

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  • Tavakolian, Hossein

    (Allameh Tabataba'i University)

Abstract

This paper studies the degree of fiscal dominance and its costs for the economy of Iran in a DSGE model. Resende & Rebei (2008) approach is used to model the degree of fiscal dominance and Leeper, Walker & Yang (2010) approach is used to model government investment. According to the first study it is assumed that a fraction of government debt is backed by discounted value of current and future primary surplus and the remaining fraction is backed by seigniorage. According to the second study, it is assumed that there is an implementation delays for building public capital projects. The results show that higher degree of fiscal dominance significantly affects the dynamics of all the main variables so that in in high fiscal dominance regimes there are lower output and higher inflation. The implementation delay is most effective when the shocks are from government.

Suggested Citation

  • Tavakolian, Hossein, 2014. "Estimating the Degree of Fiscal Dominance and its Welfare Costs in a Dynamic Stochastic General Equilibrium (in Persian)," Journal of Monetary and Banking Research (فصلنامه پژوهش‌های پولی-بانکی), Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 7(21), pages 329-359, October.
    • Handle: RePEc:mbr:jmbres:v:7:y:2014:i:21:p:329-359
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    Cited by:

    1. Pourmohammad Gelsefidi , Seyed Hamid & Tayyebnia , Ali & Mehrara , Mohsen & Amirian , Roodabeh, 2018. "Fiscal versus Monetary Dominance: Evidence from Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 13(3), pages 375-400, July.

    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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