The Impact of Publishing Islamic Treasury Bills on Fiscal Sustainability of the Iranian Government by Using a Dynamic Stochastic General Equilibrium Model

From the perspective of government accounting, the Publishing of Islamic Treasury Bills, due to the nature of these bonds that transfer of debt is permissible, there will be no additional financial burden for the government in the form of principal and interests of them. In other securities, on the other hand, the government is bound to pay the principal and its interests on the date of maturity to its holders. Paying the interests of the bonds as a new cost resource will affect government Fiscal sustainability. So, over the time, government debt will rise and get into Ponzi game. Regarding the growing trend in the use of securities in financing and the growing use of Islamic Treasury Bills, along with other debt securities recently, it is imperative to examine the aspects of Islamic Treasury Bills that can effect on the government fiscal sustainability, as a main way to achieve to a stable macroeconomic framework. This is followed in this thesis using the design of a stochastic dynamic general equilibrium model for the Iranian economy. The results show that when the government uses the Islamic Treasury bills, along with other debt securities, the debt-to-output ratio which is considered in this study as an Index of Fiscal sustainability, during productivity, monetary and oil shocks, reflect the Fiscal unsustainability of the government budget in the long run. In contrast, through the private sector investment shocks, mark-ups, exchange rate shocks, and government spending shocks, reflects budget sustainability.