Political Institutions and Government Spending Behavior in Iran

This study examines how quality of political institutions affects the distribution of government budget and how development of government spending in major sections shapes the political institutions in Iran. This question has become especially important due to recent international sanctions, aiming to change the political behavior of Iran. We use the impulse response functions (IRF) and variance decomposition analysis (VDC) on the basis of Vector Autoregressive (VAR) model with annual data from 1960 to 2006. Our results show the importance of political institutions in patronage and public goods provision spending in Iran. The results imply that a shock in positive changes of democratic quality of institutions leads to negative and statistically significant response of military spending and positive and statistically significant response of education expenditures in short term. If sanctions are successful to change the political behavior of Iran in short run (Dizaji and Bergeijk, 2013), then one can also expect to see a reduction in allocated budget for military in Iran

Exports, government size and economic growth (Evidence from Iran as a developing oil-export based economy)

In this study, I investigate the short run and long run effects of government size and exports on the economic growth of Iran as a developing oil export based economy for the period of 1974 to 2008. For this purpose I use the bounds testing approach to cointegration and error correction models, developed within an autoregressive distributed lag (ARDL) framework. A modified form of Ram’s (1986) model has been applied to include both government size and exports as determinants of economic growth in addition to labor force and capital. I use total exports, oil exports and non-oil exports respectively in three different equations to assess their effects on economic growth. Moreover, according to Armey curve(1995) in each of the equations I test the existence of non-linear relationship between government size and economic growth. My findings show that in all of the equations both in long run and short run the Armey curve is valid for Iranian economy, indicating that both a very big size and a too small size of government are harmful for growth and Iranian government should adjust its size (to have smaller size, compared to the average size over the period of this study) for obtaining higher rates of growth. The results show that total exports, the amount of oil exports in terms of barrels and oil prices could affect the economic growth positively and significantly both in short run and long run. However because of the weaknesses of the Iranian non-oil sectors, the non-oil exports could not have significant effects on growth in the long run. As a result of this study in the short run, Iran should try to attract foreign technologies and investments to develop the capacity and ability of its oil production. In the short run this can be a reliable factor for having the stable economy in comparison with relying on uncertain oil prices. In the long run Iran should use the oil revenues to improve its economic structure and invest on some non-oil sectors to diversify its non-oil exports. This can create new resources for government revenues and will reduce the dependence of the economy on Oil exports

Analysis of domestic price and inflation determinants in Iran (as a developing oil-export based economy)

Abstract The objective of this study is to examine and investigate both behaviour and determinants of domestic prices and inflation rate in Iran as a developing oil export based economy. I apply two models; the first model is for investigating the main determinants of domestic prices while the second model considers the main determinants of inflation rate. The period of study is from 1973 to 2008. Some econometrics techniques such as unit root test, cointegration test, ECM model and causality test have been used. The first model is constructed according to the studies that mostly have tried to investigate the inflation in other developing and developed countries. The results indicate that foreign prices, GDP, exchange rate and the two dummy variables DT80 and DT88 ( for capturing the structural break which have been caused respectively by the war with Iraq and the subsequent reconstructions after war) have significantly affected the domestic prices in Iran. Furthermore, in the short run the main determinants of domestic prices have been foreign prices and DT88. In contrast with Aljebrin (2006) who has considered this model for other developing oil export based economies our estimations of first model demonstrate some acceptable results about the factors that have affected the domestic prices of Iran. In the second model I apply the model which has suggested by Aljebrin(2006) to investigate the inflation in developing oil based economies. The results show that money growth, oil production growth, non-oil GDP growth and two dummy variables DT80 and DT88 have affected Iranian inflation in long run. Moreover in the short run the main determinants of inflation have been non-oil GDP growth and DT88. Our results imply that the rapid development of the non-oil sector and performing some useful policies for restructuring the economy such as diversifying the economy from the oil sector will strengthen the economy and reduce the importance of oil production as a source of inflation

External arms embargoes and their implications for government expenditure, democracy and internal conflict

We examine how arms imports reductions due to external arms embargoes affect military expenditure, democratic quality and internal conflict in a sample of 48 countries from 1990 to 2017. We construct a theoretical model of arms restrictions influencing probabilities of peaceful and conflictual states via actions and efforts undertaken by the government and rebels to promote peace. We postulate that the effect of external arms embargoes on internal conflict is conditional, requiring empirical investigation. Our empirical analysis, based on the Panel Vector Autoregressive methods, reveals that the responses of political system and different indices of democracy to decreases in arms imports are positive, and the impact on military expenditures is negative, while the responses of education expenditures, health expenditures are positive. Despite this, our findings show that arms transfer restrictions can intensify ethnic tensions and internal conflicts.</p

Energy sanctions and Russia’s democracy – autocracy:a dynamic VAR analysis

Our focus is the interplay of macroeconomic and political variables following a boycott of Russian oil and gas and on how these factors codetermine the result of sanctions. This paper uses an innovative approach to sanction success that provides a dynamic, forward-looking, perspective and deals with both the economic and the political outcome of economic sanctions simultaneously. We report the main results of a comprehensive set of 14 unrestricted VAR models that we use to analyse how negative oil and gas shocks impact on the Russian economy and Russian politics. A similar approach has been used before to analyse sanctions against Iran (Dizaji and van Bergeijk in Journal of Peace Research 2013) and offers us the possibility to investigate the dynamics of the economic-political interactions. The impact of an energy boycott is considerable, and economic costs act as powerful incentive