assessing the iranian fiscal sustainability in past and future through tax side of the economy

this paper, i have focused on the tax side of the fiscal policy to  investigate the past and future behavior of fiscal sustainability in iran. to do so, i have employed two different forward-looking and backward-looking approaches. first, the backward-looking approach is the fiscal policy rule proposed by daving & leeper (2011). precisely, this rule determines that whether the fiscal policy is active (unsustainable) or passive (sustainable). to estimate the fiscal policy rule, i have exploited markov switching model (msm) which examines the tax rate response to debt dynamics under multiple regimes. second, the forward-looking approach is the modified blanchard’s tax gap indicator (1990) for an oil-producing country. in fact, this indicator predicts the amount of tax adjustment required to stabilize the future amount of government’s debt back to its value in a particular base year. i have used time series data over the period spanning from 1993(q1) to 2013(q4).