Determinants of government debt accumulation in Iran's economy with emphasis on economic growth and budget deficit (using the Lasso and ARDL approach)

Document Type : Original Article

Authors

1 Department of Economics, Assistant Professor of Department of Economics, Saravan Higher Education Complex, Sistan and Baluchistan, Iran

2 Professor, Department of Economics, Faculty of Economics and Social Sciences, Bu- Ali Sina University, Hamedan

Abstract

Abstract

Government borrowing is considered a means of financing the government, which first appeared in 1688 in Britain and then in America, Belgium, Denmark, etc. Receiving loans and credit through domestic banks and institutions as well as through international monetary institutions is one of the things that will create debt for governments in the future. Today, government debt is a global phenomenon that most countries in the world face. The purpose of this paper is to study the impact of economic growth and government budget deficit on the accumulation of government debt in Iran's economy using the Lasso and ARDL approach for the period 1979-2023. The results of the research through the Lasso approach showed that economic growth, foreign investment, government budget deficit, trade openness, real interest rate and inflation variables were chosen as the determinants of accumulation of the government's debt. The results of the model estimation through the ARDL approach showed that in the long term, the trade openness variable had a positive and significant effect on the accumulation of government debt. Also, in the long term, economic growth and the real interest rate variables had a negative and significant effect on the dependent variable. The results of the model estimation of the dynamics of the short-term indicated the significance of the variables of trade openness, economic growth, real interest rate and budget deficit . Similar to the long-term period, trade openness had a positive and large effect of the accumulation of the government debt in the short-term period. Although the positive effect of the budget deficit was not significant, the negative effect of the interest rate on the reduction of government debt was significant in both the long-term and short-term periods.

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Public Sector Economics Studies
Volume 3, Issue 4
December 2024
Pages 503-530

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History

  • Receive Date: 14 July 2024
  • Revise Date: 13 September 2024
  • Accept Date: 15 September 2024

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