The Impact of Fiscal Policies of Government Budget Deficit on the Optimal Size of the Government at the Time of Central Bank Independence

Considering the Optimal Government Size in economy as one of the important factors in economic stability in a country, government financial policies will have a direct impact on the Optimal Size of Government. This study evaluates the impact of government fiscal policies on government's optimal size when a budget deficit occurs, and it is being examined at the time of central bank independence. In this study, Cukierman and Army Curve indexes are used in order to test the Central Bank Independence and Optimum Government Size, respectively. The method used in this study is to use Grounded Theory, which is considered as a descriptive method in this research. Also, the impact of government fiscal policies on the optimal government size during the budget deficit is analyzed using the final model of this theory and data coding. Having an independent central bank is a linking bridge between the implementation of government financial policies and the optimal size of the government. In this study, it is shown that the path to reaching the optimal government size is improved by the financial policies for deficits, with the lack of borrowing from the central bank and sales of corporate bonds with the aim of preventing money creation.