The response of society's welfare to government debt shocks and institutional quality under the golden rule of financial development

Subject Areas : Journal of Iranian Social Development Studies

mohamadbagher sadeghi ¹ , marjan damankeshideh ² , Ali Younessi ³ , Shahriyar nassabian ⁴ , Amir reza Keyghobadi ⁵

1 - گروه اقتصاد، واحد تهران مرکزی، دانشگاه آزاد اسلامی، تهران، ایران
2 - گروه اقتصاد، واحد تهران مرکزی، دانشگاه آزاد اسلامی، تهران، ایران
3 - Department of Economics, Payam Noor University, Tehran, Iran
4 - Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran
5 - Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran

Received: 2023-10-14 Accepted : 2023-11-26 Published : 2023-12-22

Keywords: Government debt, institutional quality, society welfare, Financial Development, structural vector autoregression,

Abstract :

 The present study explains the response of society's welfare to government debt shocks andinstitutional quality under the golden rule of financial development for the years 1365-1400. For this purpose,using the structural vector autoregression model (SVAR), which are known as impulse models; The effects ofuncertainty caused by the size of the government, government budget deficit, financial development, oil andcurrency impulses on the economic well-being of the society were investigated. The findings showed that animpulse from the oil price and exchange rate causes a 9% and 2% decrease in the economic well-being of thesociety. The response of the economic well-being of the society to the impetus from the financial developmentarea is also close to 3%. Also, the results of the analysis of variance caused by a sudden change specific impulseshow that in the third period, 19.13 percent of the changes are related to oil price impulses, 15.97 percent arerelated to the exchange rate impulse, 27.98 percent are related to the budget deficit impulse, 67 2.2% wasrelated to the impulse of government size and 3.56% was related to the impulse of financial development.Because the relationship of financial markets is the main factor in the transfer of oil price instability to othersectors of the economy, financial discipline is the only wise way to deal with the phenomenon of improper use ofoil resources, currency and financial instability. For this reason, it is necessary to vaccinate the economyagainst the instability of oil revenues by disconnecting the government's current expenditures with oil revenues.Also, regarding the way of spending oil revenues, the existing laws regarding saving a part of oil revenues in theNational Development Fund should be implemented with more executive guarantee 

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