Zahra Karimi Takanlou - Faculty of Economics, Management and business, Tabriz University

This paper develops an analysis of budget deficit financing in termsof a crowding out or crowding in effect on the activity of the privatesector for the economies of Iran and Algeria as two MENA countries,(because of its economic structures (dependence on oil revenue)) duringthe period ۱۹۷۰-۲۰۱۲ by using Cointegration and Vector ErrorCorrection approaches. The analysis confirms the existence of acrowding out effect in Algeria and a crowding in effect in Iran.

budget deficit, private sector, Crowding out or Crowding in Effects, Cointegration, VECM (Vector Error Correction Model)