Author

  • Salma Keshtkaran

    • Zand Institute of Higher Education-Shiraz, Iran
    • Iran, Islamic Republic of

  • Khosrow Piraee

    • Islamic Azad University (Iran-Shiraz branch), Iran
    • Iran, Islamic Republic of

  • Farzane Bagheri

    • Islamic Azad University (Iran-Shiraz branch), Iran
    • Iran, Islamic Republic of

Abstract

The aim of this study is to demonstrate the relationship between government size and economic growth in Iran within bivariate and trivariate causality framework. For this purpose, Vector Auto Regressive Model, Johansen Test and Auto Regressive Distributed Lag Model were used for analyzing the long run relationship, whereas Error Correction Model was considered for the short run. Moreover Wald Coefficient was used for bivariate and trivariate causality test. The results show that the relationship between government size and economic growth in Iran is negative. Furthermore there is a one-way causality relationship for the long run and the short run-from government size to economic growth. Inclusion of unemployment and oil revenue (separately) as the third variable causes the relationship to remain negative. However the direction of causality depends on the choice of the third variable. If unemployment rate is considered as the third variable instead, there will be no causality between the two variables in the long run. Although in the short run government size is still the cause of economic growth. However, consideration of oil revenue as the third variable results in a two-way causality relationship between the government size and the economic growth in the long run and the short run.

Keywords

References

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How to Cite

Keshtkaran, S., Piraee, K., & Bagheri, F. (2012). The Relationship between Government Size and Economic Growth in Iran; Bivariate and Trivariate Causality Testing. Journal of Economics and Behavioral Studies, 4(5), 268-276. https://doi.org/10.22610/jebs.v4i5.327

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Copyright (c) 2012 Salma Keshtkaran, Khosrow Piraee, Farzane Bagheri (Author)

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Research Paper

Published in

Vol. 4 No. 5 (2012) Behavioural Finance, Policy & Cross-Cultural Markets View issue contents

Published

2012-05-15

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