Testing Fiscal Reaction Function in Iran: An Application of Nonlinear Dickey-Fuller (NDF) Test مقالة

مؤلف: jafari samimi، ahmad ؛ Karimi Petanlar، Saeed ؛ Montazeri Shoorekchali، Jalal ؛

Iranian Economic Reveiw Summer 2017, Volume 21 - Number 3 التصنيف العلمية - البحثية (Ministry of Science/ISC (‎16 صفحة - من 567 إلی 582 )

الکلمات المفتاحية: Iran Unit Root Test Nonlinear Dickey-Fuller (NDF) Test STR Model Fiscal Reaction Function NDF Test Testing Fuller Smooth Transition Autoregressive Model

خلاصة:

This paper is to convince the usage of the nonlinear unit root tests when dealing with a nonlinear model. To do so, the stationary test for variables in a model titles “Fiscal Reaction Function in Iran” has been applied according to both the ordinary and the Nonlinear Dickey-Fuller (NDF) tests. Results show that while variables under investigation are stationary in a nonlinear form, augmented Dickey-Fuller test indicates tendency to fail and reject the null hypothesis of a unit root in the presence of nonlinear dynamics. Therefore based on the results of Nonlinear Dickey-Fuller (NDF), the paper estimates the fiscal reaction function (FRF) in Iran. The estimated nonlinear regression supports a threshold behavior of two regimes in applying the fiscal reaction. Finally, findings confirm that fiscal policy in Iran is countercyclical though not sensitive in order to react to accumulation of the government debt.

ملخص الجهاز:

Results show that while variables under investigation are stationary in a nonlinear form, augmented Dickey- Fuller test indicates tendency to fail and reject the null hypothesis of a unit root in the presence of nonlinear dynamics. Accordingly to the low power of traditional unit root tests to reject the null hypothesis of a unit root in the presence of asymmetric dynamics, nonlinear stationary tests such as threshold autoregressive [TAR] models (Tong, 1990) or smooth transition autoregressive [STAR] models (Teräsvirta, 1994) have become quite popular in applied new time series econometrics (Demetrescu and Kruse, 2013: 42). Following the previous studies and according to the considerations mentioned, this paper examines variables stationary of "Fiscal Reaction Function in Iran" using a unit root test in the smooth transition autoregressive (STAR) framework. Finally, according to the results of unit root tests, this paper examines "fiscal sustainability of government Policies" in the form of a nonlinear fiscal reaction function. (2011), the basic fiscal reaction function is in the following form: (B / Y )t Where:  1   2 (B / Y )t 1  3 (D / Y )t 1   4 ( yˆ )t   t (11) B/Y= Primary Balance/GDP D/Y= Government Debt/GDP yˆ =Output Gap According to Terasvirta (1994) and with the aim of considering the asymmetric effects of debt level and macroeconomic fluctuations over government decisions, for equation (11) is considered a non-linear structure based on the smooth transition regression (STR) model: (B / Y)t  t  (t ).

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