Subscribe to our Newsletter and get informed about new publication regulary and special discounts for subscribers!

ILSHS > ILSHS Volume 11 > Government Expenditure and Economic Growth in Iran
< Back to Volume

Government Expenditure and Economic Growth in Iran

Full Text PDF


This paper examines causal relationships between Government Recurrent Expenditure (GRE) and GDP for Iran using annual data over the period 1970-2010. The Gregory-Hansen (1996) cointegration technique, allowing for the presence of potential structural breaks in data, is applied to empirically examine the long-run co-movement between these variables. The results suggest that there is a long-run relationship between these variables. The Granger Causality test indicates strong unidirectional effects from GDP to GRE. But there is no evidence that TRE promotes long-term economic growth. Moreover, the main results in this paper confirm that there is an instantaneous as well as unidirectional causal link running from GDP to GRE. Based on the results, the policy makers should ensure that recurrent expenditures are properly managed to accelerate economic growth. Moreover, government should promote efficiency in the allocation of resources by encouraging more private sector participation to ensure productivity-intensive growth.


International Letters of Social and Humanistic Sciences (Volume 11)
M. Mehrara et al., "Government Expenditure and Economic Growth in Iran", International Letters of Social and Humanistic Sciences, Vol. 11, pp. 76-83, 2013
Online since:
September 2013

Abdullah H., Journal of Administrative Science 12(2) (2000) 173-191.

Al-Yousif Y., Does Government Expenditure Inhibit or Promote Economic Growth: Some Empirical Evidence from Saudi Arabia. Indian Economic Journal 48(2) (2000).

Cooray A., Comparative Economic Studies 51(3) (2009) 401-418.

Dickey D., Fuller W., Journal of the American Statistical Association 74 (1979) 427-431.

Dickey, D. A., W. A. Fuller, Econometrica 49(1981) 1057-1072.

Engle R. F., Granger C. W. J., Econometrica 55(2) (1987) 987-1008.

Granger C. W. J., Econometrica 37(3) (1969) 424-438.

Granger C. W. J., Journal of Econometrics 39 (1988) 199-211.

Gregory Allan W., Hansen Bruce E., Journal of Econometrics 70(1) (1996) 99-126.

Hatanaka M., (1996). Time-Series-Based Econometrics: Unit Roots and Cointegration, Oxford University Press.

Johansen S., Journal of Economic Dynamics and Control 12(2-3) (1988) 231-254.

Johansen S., Econometrica 59(6) (1991) 1551-1580.

Johansen S., Jeslius K., Oxford Bulletin of Economics and Statistics 52(2) (1990) 169-210.

Johansen S., Juselius K., Journal of Econometrics 53 (1992) 211-244.

Kaldor, N., Review of Economic Studies 23(2) (1956) 83-100.

Kunitomo N. (1996). Tests OF Unit roots and Cointegration Hypotheses in Econometric Models, 47(1), pp.79-109.

Lewis W. A. (1955). The Theory of Economic Growth, Irwin, Homewood.

Lutkepohl H. (2004). Vector Autoregressive and Vector Error Correction Model, in Lutkepohl, H. and M. Kratzig (ed. ), Applied Time Series econometrics, Cambridge University Press.

Masih A. M. M., R. Masih, Energy Economics 18 (1996) 165-183.

Asafu-Adjaye J., Energy Economics 22 (2000) 615-625.

Samuelson P., Modigiani P., Review of Economic Studies 33 (1966) 269-301.

Pahlavani M., Wilson E. J., A. Valadkhani, International Journal of applied Business and Economic Research 4(1) (2006) 23-44.

Perron P., Econometrica 57 (1989) 1361-1401.

Phillips P. C. B., Perron P., Biometrica 75 (1988) 335-346.

Ranjan K., Sharma C., The ICFAI University Journal of Public Finance 6(3) (2008) 60-69.

Zivot, E., Andrews, D., Journal of Business and Economic Statistics 10 (1992) 251-70. ( Received 05 September 2013; accepted 09 September 2013 ).

Show More Hide
Cited By:

[1] G. Dudzevičiūtė, A. Šimelytė, A. Liučvaitienė, R. Woodward, "Government expenditure and economic growth in the European Union countries", International Journal of Social Economics, p. 00, 2017


[2] I. Iskandar, R. Willett, S. Xu, "The development of a government cash forecasting model", Journal of Public Budgeting, Accounting & Financial Management, Vol. 30, p. 368, 2018