and derived conditions under which oil revenues are likely to have a lasting impact. They showed that (log) oil exports over the period 1979-2006 enter the long run output equation with a coefficient equal to the share of capital and found clear evidence for two long run relations: an output equation as predicted by the theory and a standard real money demand equation with inflation acting as a proxy for the (missing) market interest rate. They also defined that the Iranianeconomy adjusts quite quickly to the shocks in foreign output and oil exports, which could be partly due to the relatively underdeveloped nature of Iran’s financial markets.
This paper investigates the relationship between macroeconomic instability and private investment of the Iranianeconomy. The study uses a trivariate VAR(2)-GARCH(1,1)-in-Mean with diagonal BEKK approach to proxied inflation and exchange rate uncertainties as the main indicators of macroeconomic instability. Moreover, Bounds testing approach to level relationship applied to investigate the long-run relationship between macroeconomic instability and private investment. By taking the structural breaks into account, results of the paper reveal that there are mean spillovers between inflation, exchange rate and private investment. There also is a negative effect of macroeconomic instability on private investment over the period of study, 1988:1-2010:4. These results support Pindyck (1982, 1988, 1991), Caballero (1991), Ferderer (1993a), Caballero and Pindyck (1996).
n this paper, we analyze the effects of oil revenue shocks on different sectors of Iranianeconomy. We use quarterly data of Iranianeconomy from 1988:2 to 2011:1 to analyze a time varying parameter VAR model with Bayesian method. The results show that in late 1980s and early 1990s, the positive effects of oil revenue were mostly emerged in industrial and oil sectors, having almost no effect on services sector and negative effect on agricultural sector. In 2000s, oil revenue is relatively less effective in industrial sector, while more effective in agricultural and services sectors.
7- H.R. Shoraka and S. Safari (1999), "A Survey of Effects of Export on Economic Sectors Growth in Iran, Journal of Pajoheshhai Bazargani, No. 6 8- H. Taghavi and A.R. Nakhjavani (2002), "Growth of non-oil Export in IranianEconomy", Political and Economic Attala, at, vol. 16, No. 171-172 9- H. Shahrestani and M. Mirzaeinejad (2003), "The relation between export and economic growth", Journal of Economic and Management, vol. 18, No. 73 (Iran)
be one digit. Some experts believe that by lowering the bank interest rate, the finished cost of goods and services decreases, and secondly, investments and therefore production increase, both of which will lead to lower inflation and provide sustainable employment. Opponents, on the other hand, are concerned about the negative effects of lowering interest rates without lowering inflation and see the basic condition for nominal interest rate reducing inflation rates, and hence people's inflation expectations and eventually relative positivity of nominal interest rate. Since the results of the law of the rationalize interest rate of banking facilities are directly related to the priming and latency effects of two bank interest rates and inflation rate, the present study first examined the relationship direction between inflation rate and interest rate using Granger causality test. In this regard, the findings of the Granger causality test showed that the causality direction is from the inflation rate to the bank interest rate. Then in the second step based on the research literature besides the inflation variable other variables were considered as independent variables in the model and the final functional form of the factors affecting the interest rate for the period of 1978-2018 in the framework of the Autoregressive Distributed Lag method (ARDL) estimated. Modeling results of ARDL model showed that inflation rate, legal deposit ratio, exchange rate changes, and land price index have a positive and significant effect on interest rate in the short and long run; How ever, the effect of the economic growth rate on the interest rate has been only confirmed in the long run. The results also indicate that if an unexpected shock enters a bank interest rate variable, it will take approximately three periods before the effects of the shock and the economy return to their original equilibrium. The results of this study are in line with the results of Khajeh Mohammadlou and Khodaveisi (2017), Mahdavi Mazdeh et al. (2019), Kanwal et al. (2014), Arbanovsky (2017) and Lee & Warner (2018). According to the findings of the present study, it seems that the opposition's view of reducing the bank interest rate can be confirmed; Therefore, it can be said that Fisher's theory holds true for the Iranianeconomy and policymakers should be aware that lowering the bank interest rate only in the long run and in the light of the gradual decline in the inflation rate will have positive consequences for the economy. In this regard, the central bank can concentrate on inflation control in
elimination of subsidies remedy distorted prices, this study peruses the effect of subsidies elimination on Iranianeconomy. Holland et al, (2007) attempted to predict the effect of increased energy prices on U.S. agricultural economy in a study for the department of agriculture. Results showed that sectors that were highly energy dependent, an increase in energy price would cause cost growth and loss of competitive advantage. This research suggested that the growth of energy price can be compensated by an improvement in efficiency of technology and replacement with more efficient technology in energy. In 2010, Lin and Jiang analyzed the energy subsidies reform by using general equilibrium in China. The results showed that a reduction in subsidies, have significant effects on energy demand and has a negative impact on macroeconomic variables(Lin and Jiang, 2010).
his paper investigates the movement between stock market bubbles and fluctuations in aggregate variables within a DSGE model for the Iranianeconomy. We apply a new Keynesian monetary framework with nominal rigidity in wages and prices based on the study by Ikeda (2013), which is developed with appropriate framework for the Iranianeconomy. We consider central bank behavior different from Taylor Rule, and we suppose an economy with oil export. In order to study the role of money in economy, we apply “Money in Utility” approach. We study the TFP shock, the monetary policy shock, the government spending shock, the oil income shock and the sentiment shock. Bubbles in our model emerge through a positive feedback loop mechanism supported by self-fulfilling beliefs. Moreover, a sentiment shock drives the movements of bubbles that explain most of the stock market fluctuations and variations in real economy. The result of calibrated model reveals a relation between moments of variables in the model and moments of real data in the economy. Therefore, this model can help us to analyze the effect of stock market bubbles on macroeconomic variables in the economy.
One Symptom of Dutch Disease is the increase in the share of government expenditure in oil revenues. Here we investigate the trend of this variable. It is noted that this index has major fluctuations and is highly dependent on oil incomes. Hence, as the Iranian public budget is mainly dependent on the oil revenue, the trend of macro variables would be unstable in principle. In the high price condition of oil revenue, the GDP generally increases. The outcome, however, depends on the direction of the factor movement. If the new income is used in productive capital formation framework, it would be promising. If new income is used, however, for current expenditure, there are no efficient outlooks for the future of the economy. In the Iranianeconomy, the major part of resource rent is utilized for current expenditures. As figure (6) indicates the current expenditures include a great part of new income. In this figure GT is a total payment of government, GO is share of government expenditure in oil income, GC is Constructional payment and YO is Oil income. Another difficulty in the Iranianeconomy, which is again related to DRR, is the huge role of government and her crowding out effect on private sector activities. This is also another symptom of Dutch Disease on one hand and bad governance on the other (Nily et al., 2008). Ultimately Iranianeconomy is still striving with Dutch Disease, is facing with rentier state and the resource curse,
The purpose of this study has been to investigate quantitatively the possibilities and effects of technology transfer through the imports of intermediate goods from developed to developing countries with the main emphasize on Iranianeconomy. For this purpose we have used a CGE model. The results show that a hypothetical technology improvement in intermediate goods industries of advanced trade partner will have positive effects in productivity improvement of Iran through its intermediate imports. Our findings show that technology transfer embodied in Iran’s imports of intermediate goods leads to increase in outputs and decrease in prices. Factors such as absorptive capacity, structural similarity and effectiveness were contributed to these spillover effects of technological improvements in Iran. Despite positive spillover effects of technology imports, its extent, however, was limited mainly because of relatively small shares and fluctuations of intermediate imports. These results indicate that Iran has high potentiality for increasing its imports of intermediated goods.
In this research, econometric methods were used to study the effect of privatization policies on Tehran Stock Exchange returns. According to the results of regime switching GARCH models, it was determined that according to different types of diagnostic statistics, 3-regime model is preferable to others, and Tehran Stock Exchange returns had different regimes in their volatile process during the studied period (2000-2015), among them stability of fluctuations in single-regime GARCH models is higher than multi-regime models. According to the results of the estimation of the three-regime GARCH model, the main events of the Article 44 in the direction of privatization in the Iranianeconomy and its implementation during the study period were effective in changing the regimes of the fluctuating process ofstock returns, which confirms the 2 nd hypothesis of the research. Also, according to the results of the
The empirical results of this paper are a set of benchmark statistics for evaluating the performance of business cycle models for the Iranianeconomy. In an oil exporting country such as Iran, oil price shocks influence fiscal and monetary policies. Therefore, this paper attempts to point out the cyclical co-movement of oil prices with macroeconomic variables. In addition, vector error correction (VAR) and co-integration approaches are used to study the role of monetary policy shocks on the macroeconomic fluctuations.
To understand the effect of these subsidies on the economy, remember that they can be considered as a negative tax. Since they are mostly paid for specific goods and services, they act much the same way as a negative sales tax. That is, they lower the price of these goods and services to consumers. The main effect of subsidies, therefore, is an increase in consumption. Indeed, between 1979 and 1995, per capita private consumption rose by about 10% while, during the same period, real per capita GDP showed a 5% decline. This is not to say that the increase in per capita consumption was due to subsidies. On the contrary, the amount of subsidies compared with aggregate private consumption is too small to allow the detection of a statistically significant relation between the two. Yet for a country that needs savings, encouraging consumption even if its effect is negligible cannot be defended. Iran is suffering a 20% annual rate of inflation, which is demand driven, and the central bank has been incapable of curbing it. An increase in consumption will not bode well for controlling demand and inflation.
In this paper, we move the empirical literature forward by examining the direct effects of oil price uncertainty on real economic activity as well as the response of real GDP growth to oil price shocks by using annually data for economy of Iran. The model is based on a structural VAR that is modified to accommodate GARCH-in-mean errors, as detailed in Engle & Kroner (1995), Grier et al. (2004), Shields et al. (2005), and Elder & Serletis (2010). As a measure of uncertainty about the impending real oil price, we utilize the conditional standard deviation of the forecast error for the change in the real price of oil.
all foreign economic influential factors in the long run, including western sanctions and worldwide financial crisis. 406 According to Iran, there are Western efforts to damage the Iranianeconomy with the purpose to overthrow the Iranian regime. 407 According to Iran’s current supreme leader Khamenei, a strong Iranianeconomy is important for Iran’s overall security. 408 Through the Resistance Economy doctrine, Iran wants to minimize the damage that is caused by countries that impose sanctions on Iran and Iran wants to be less dependent on those countries that impose sanctions on Iran. 409 Through the Resistance Economy doctrine, Iranian economic policy-making is totally a part of a national security doctrine. 410 In accordance with the Resistance Economy doctrine, Iran wants to use energy trade for the political purposes within the framework of the Resistance Economy doctrine. 411 So, gaining a higher absolute level of economic welfare is not a goal in itself in the case of Iran,
This paper re-investigates the empirical relationship between budget deficit and inflation in Iranianeconomy by using the quarterly data for the period of 1990:1-2007:4. To cary out a test of no structural break against an unknown number of breaks in the Iranian macroeconomic variables, we use the endogenously determined multiple break test developed by Bai & Perron (2003). As, there is a structural break in the time series data, we use Perron(1990) unit root test to test of stationarity. According to unit root tests, the variables under investigation aren’t in the same order of integrating, we employ Bounds test approach to cointegration proposed by Pesaran et al. (2001) to investigate the long-run relationship between budget deficit and inflation. The result show that, there is a positive and significant relationship between deficit-inflation in Iran. Also, there is a unilateral relationship between def , gdp and oer from these variables to inf. Our finding is in line with Abdul (2008) and Pekarski (2008). With regard to the role of the fiscal deficit, the estimation provide evidence that a one percentage point increase in the budget deficit leads an increase of almost 0.00001 percentage points in the inflation. This implies that inflation bias can be explained by deficit bias in Iran. Based on these conclusion, it seems reasonable to conclude that expansionary fiscal can be inflationary.
When subsidies reform plan became serious, various studies have attempted to analyze the impact of this economic decision on Iranianeconomy through different approaches. However, the impact of elimination or reforming subsidies has long been studied in other countries. For example, Hope and Singh (1995) in their study entitled “The increase of energy carrier prices in developing countries: a case study of Turkey, Colombia, Zimbabwe, Indonesia, Ghana, and Malaysia” investigated the impact of increased energy price on variables of poverty, inflation, growth, national income, and industrial competitiveness during 1980-1990. Their results in manufacturing industrial sector indicated that except for energy-consuming industries, in the case of increased energy prices, most industries have had sufficient flexibility for substituting and notwithstanding the price of energy carriers. Their study also showed that the impact of increased prices was less than other changes.
Shakeri et al. (2015) investigated the determinants of inflation in the period 1960- 2011 and used from autoregressive model (VAR). In this study due to the structure of the Iranianeconomy, the mark-up index is derived and its growth along with liquidity growth, nominal exchange rate growth and productivity growth are used in the model. The results of Granger causality test show one-way causal relationship between the three variables of mark-up growth, exchange rates growth and labor productivity growth in one hand and inflation on the other hand, as well as two-way causal relationship between money growth and inflation. Also impuls response functions confirm a negative relationship between labor productivity growth and inflation. Moreover, based on the analysis of impulse response functions of three variables of mark-up growth, liquidity growth and exchange rate growth, they are positively correlated with inflation. Variance decomposition showed that each of the variables of inflation, mark-up growth and labor productivity growth in the short-term and respectively with the shares of 45, 29 and 25 percent, have the highest explanation on inflation forecast variance.
From the beginning of 2002, the Iranian government committed itself to implement- ing trade reforms, exchange rate unification, ratification of the law on foreign invest- ment, the licensing of three private banks and tax reform, intended to adjust distortions and structural imbalances. The government in Iran has since launched several market- oriented reforms aimed at reversing the recent downward economic spiral, including the reform of food and energy subsidies. However, international sanctions combined with years of government mismanagement and widespread corruption have left the economy vulnerable to very high inflation and negative growth rates (Hufbauer and Schott, 2006; Katzman (June 2013); Plaut (2013); International Monetary Fund (2014)). For instance, the Statistical Centre of Iran (SCI) reported that the inflation rate in Iran reached 35 percent in December 2013, and the economy faced an unemployment rate of around 13 percent. Devarajan and Mottaghi (2014) note that the economy of Iran has experienced negative growth rates of -3.0 and -2.1 percent for 2012 and 2013 respectively. Since the tightening of energy and financial sanctions against Iran in 2012, the Iranian currency (Rial) lost more than 80% of its exchange value (Monshipouri and Dorraj, 2013). But it is difficult to attribute the effects on macroeconomic variables like inflation and growth rates to one policy (international sanctions) or the other (food and energy subsidy re- form) since both occurred over the same period and both represented large economic shocks to the Iranianeconomy. This problem of disentangling the effects of such policies is well suited to CGE modelling which can isolate the effects of one set of economic shocks in clearly specified counterfactual simulations.