The Impact of Financial Transparency Shocks, Government Size, and Government Spending Efficiency on Cyclical Volatility Using a Structural Periodic Method
Keywords:
Government spending, Oil price shocks–, Market uncertainty , Macroeconomic indicators , Market volatilityAbstract
Objective: This study aims to empirically examine the impact of fiscal transparency, government size, and government spending efficiency shocks on cyclical fluctuations in Iran’s economy using a Structural Vector Autoregression (SVAR) approach.
Methodology: This applied and descriptive–correlational research uses annual data from 1996 to 2024. The study employs the SVAR model within a structural periodic analytical framework. The core variables include the output gap, oil price shocks, government size, spending efficiency, regulatory quality, corruption control, and fiscal transparency. Stationarity was tested via the ADF test, long-run relationships through Johansen cointegration, and the model’s stability verified using impulse response functions and variance decomposition analysis.
Findings: The EGARCH estimation revealed that positive oil price shocks increase global market volatility and uncertainty, while negative shocks have a smaller dampening effect. Cointegration tests confirmed the existence of long-term equilibrium among variables. SVAR results showed that oil price and budget deficit shocks increase cyclical volatility by 19% and 16%, respectively. Conversely, government spending efficiency reduces volatility by 9%, regulatory quality by 6%, corruption control by 21%, and financial transparency by 3%. The corruption control index exhibited the strongest stabilizing effect on cyclical fluctuations.
Conclusion: The results indicate that Iran’s cyclical fluctuations are significantly influenced by financial and institutional shocks. Enhancing fiscal transparency, improving spending efficiency, and strengthening corruption control can substantially mitigate macroeconomic volatility and foster long-term economic stability. The SVAR-based structural analysis provides a reliable framework for developing evidence-based economic policies.
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Copyright (c) 2025 Seyed Amirhosein Shekarabi, Yeganeh Mousavi Jahromi, Farhad Ghafari (Author)
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