Journal of Econometric Modelling

Journal of Econometric Modelling

Investigating the Impact of Economic, Political, and Financial Risks on Government Debt in Iran

Document Type : Original Article

Authors
Sahar Dashtban Farooji 1
Majid Dashtban Farooji 2
1 Assistant Professor, Department of Economics, Faculty of Economics and Aministrative Sciences, University of Bojnord, Bojnord, Iran.
2 Associate Professor, Department of Economics, Faculty of Economics and Aministrative Sciences, University of Bojnord, Bojnord, Iran.
10.22075/jem.2026.41698.2090
Abstract
Abstract

This study examines the effects of economic, political, and financial risks on government debt in Iran over the period 1984–2023 in the Iranian calendar, using a threshold regression approach. Given international sanctions and limited access to global financial markets, budget deficit financing relies primarily on domestic resources; consequently, domestic government debt is the focus of the analysis. The findings indicate that the government’s fiscal behavior is influenced by a threshold value of 3.6, which distinguishes fiscal stability from the onset of a crisis. Economic risk has a positive and statistically significant effect on government debt in the first regime, whereas its marginal effect becomes negative and significant in the second regime. Financial risk has a negative and significant effect in the first regime but a positive and significant marginal effect in the second. Political risk has a positive and significant effect on government debt in both regimes.

JEL Classification: H63, E02, C33.
Keywords
Government Debt
Economic Stability
Economic Risk
Political Risk
Financial Risk