Designing a rule-based fiscal framework in Iran economy

The existence of a structural budget deficit in Iranian economy and the lack of fiscal discipline have raised concerns about the financial stability of governments among economists. In recent decades, fiscal rules have been considered as a way to establish fiscal discipline and financial sustainability of governments around the world. In this regard, the present study seeks to design a fiscal framework based on the three rules of debt ceiling, budget balance and expenditure for Iranian economy. The results of applying the stochastic simulation method show a high level of current public debt compared to the debt rule ceiling estimated by the model and the budget balance rule will be greatly effective in improving the future path of public debt. In other words, applying the budget balance rule reduces the fluctuations of the future path of public debt. It is also suggested to establish an institutional mechanism as a complementary institution with the aim of improving the performance and effectiveness of fiscal rules, especially for expenditures rule and ensuring their implementation