Relationship between oil revenues and government expenditure using wavelet analysis method: Evidence from Iran

Abstract

Oil export revenues has a highly percentage of the government annual budgets in Iran, therefore has a strategic role in the structure of the Iranian economy. This article tries to examine the relationship between oil exports revenues and government expenditure in Iran over the period 1996 - 2007 by using Wavelet analysis approach. This method help us to detail the main curve of these two variables to different wavelets in separate categories, so this analyze shows the correlation between them better and the results are more predictable. We can find a significant impact of oil export revenues on government expenditure at different period of time. Our results show a strong positive relationship between these two variables during long term period.