Mohsen Khezri; Bahram Sahabi; Kazem Yavari; Hassan Heydari
Volume 15, Issue 57 , July 2015, , Pages 193-228
Abstract
Given the importance of inflation in Iran economy, scrutiny of inflation determinants is important .according to various studies, evaluation of determinants of inflation using standard VAR model, may lead to wrong conclusions and this is due to omitted variables bias in VAR model. For example, the problem ...
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Given the importance of inflation in Iran economy, scrutiny of inflation determinants is important .according to various studies, evaluation of determinants of inflation using standard VAR model, may lead to wrong conclusions and this is due to omitted variables bias in VAR model. For example, the problem of price puzzle in the empirical literature is one of these results. In this study, for a more accurate assessment of determinants of inflation in Iranian economy and forecasting inflation, instead of using FAVAR model with constant coefficients, we have employed TVP-FAVAR models and inflation has been modeled. In this model, the variables of GDP growth, growth of the monetary base, inflation, exchange rates and interest rates are considered as the main variables, and to estimate the non-observable variables of speculation section return, variables in the overall classification are modeled. Based on the results, the relationship between the variables change over time and conditions prevailing in the economy is effective on the influence of model variables on each other.
Hassan Heidari; Zahra Salehiyan Salehi Nejad; Soleiman Feizi
Volume 14, Issue 54 , October 2014, , Pages 67-99
Abstract
Given the importance of identifying the relationship between exchange rate and trade balance in adoption of appropriate economic adjustment policies and the requirement of accurate estimation of elasticity of trade balance to income and price changes for proper timing of such policies, in this study ...
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Given the importance of identifying the relationship between exchange rate and trade balance in adoption of appropriate economic adjustment policies and the requirement of accurate estimation of elasticity of trade balance to income and price changes for proper timing of such policies, in this study the effect of domestic and foreign income and real exchange rates on the Iranian trade balance has been investigated. Moreover, the reactions of trade balance to changes in the variables of interest have been estimated using time varying parameter models over the period of 1338-1389.The results show that the coefficients of the estimated model are not constant over the time and they are influenced by structural changes such as: oil price shocks, economic policies and exogenous shocks such as the imposed war and the Islamic revolution. By comparing the price elasticity of the balance of trade and the real exchange rate, it can be seen that by increasing real exchange rates during the period of 47-50 and 56-67, the price elasticity is positive and becomes negative when real exchange rates reduce.