Analyzing the Effects of Change in State Budget Components on Macroeconomic Variables

This study is designed to investigate the effects and consequences of government methods of financing on macroeconomic variables. to have a comprehensive analysis of this goal, a dynamic model with rational expectation including household (ricardian and non- ricardian), firms, government, and the central bank is designed in which we try to keep characteristics of iranian economy. in the fiscal sector, government expenditures have been divided into three parts: merit goods expenditures, public goods expenditures and construction expenditures; moreover, government tax revenues as fiscal instruments are divided into three categories: consumption tax rate, capital tax rate and wage tax rate. the structural parameters of the model were estimated using seasonal data of 2004 – 2020. the results of the model simulation show that an increase of tax rate in order to finance government expenditures depends on the nature of government spending (current or construction): if the goal is to provide the current expenditure and the government is willing to has minimum effects on consumption and production, then it is necessary to increase the tax rate on consumption or the tax rate on investment.