The Economy of Iran
behzad sadeghvand; Hassan Heidari; Mehdi Nejati
Abstract
Iran is simultaneously facing the issue of sanctions and their adverse effects on various economic sectors, as well as numerous environmental challenges. The main objective of this research is to examine the extent to which sanctions exacerbate environmental problems in Iran. For this purpose, the effects ...
Read More
Iran is simultaneously facing the issue of sanctions and their adverse effects on various economic sectors, as well as numerous environmental challenges. The main objective of this research is to examine the extent to which sanctions exacerbate environmental problems in Iran. For this purpose, the effects of sanctions on the increase in carbon dioxide emissions in Iran have been investigated under three scenarios of 60%, 65%, and 70% reductions in oil exports. The GTAP-E-Power model, a computable general equilibrium model, has been dynamically used for this analysis. The results indicate that the total carbon dioxide emissions in Iran increase with the imposition of oil sanctions, and the emissions rise further as the sanctions intensify. When examining carbon dioxide emissions by economic sector, it was found that the electricity production and distribution sector, low-tech manufacturing industries, base-load fossil fuel power generation, and petroleum production were the sectors that not only experienced the highest increase in carbon dioxide emissions but also saw an intensification of emissions as sanctions tightened. In contrast, renewable energy-based power generation and high-tech manufacturing industries either experienced a reduction in carbon dioxide production or a slight increase compared to other sectors under the three scenarios. Based on the results, policy recommendations include lifting sanctions as a macro political and economic priority, investing in petroleum production with access to modern technologies, focusing on the development of renewable resources for electricity generation, strengthening high-tech industries with access to advanced technologies, and concentrating on sectors resilient to sanctions.
Shahryar Zaroki; Ahmadreza Ahmadi
Abstract
Crude oil and the rents derived from it can present both advantages and disadvantages for oil-rich countries. Numerous studies have examined the impact of oil rents on various variables such as economic growth, inflation, and financial development. Among these, the potential role of oil rents in ...
Read More
Crude oil and the rents derived from it can present both advantages and disadvantages for oil-rich countries. Numerous studies have examined the impact of oil rents on various variables such as economic growth, inflation, and financial development. Among these, the potential role of oil rents in income inequality, particularly in light of the underground economy, appears to have been overlooked in previous domestic studies. To address this gap, the present research first calculates the relative size of the underground economy using a MIMIC method, revealing an average of 16.8% in Iran’s economy. Subsequently, employing a nonlinear autoregressive distributed lag (NARDL) approach, the study investigates and tests the effect of oil rents on income inequality while considering the underground economy over the period from 1978 to 2022. The long-run results indicate that positive shocks in oil rents are associated with a desirable (negative) effect on income inequality, while negative shocks lead to an undesirable (positive) effect. Furthermore, the underground economy acts as a double-edged sword; that is to say, an increase in the relative size of the underground economy has the potential to turn the favorable (negative) impact of positive oil rent shocks on income inequality into an unfavorable one, and conversely, it can transform the unfavorable (positive) impact of negative oil rent shocks on income inequality into a favorable one. Additionally, real GDP per capita exhibits an inverse U-shaped relationship with income inequality, while unemployment positively influences income inequality. IntroductionA country’s progress toward social justice can be quantitatively assessed through indicators such as income distribution, poverty, and welfare. In recent years, rising concerns over income inequality have expanded the discourse on how natural resource rents—particularly oil revenues—shape economic growth and development. While resource abundance is often perceived as a blessing, its effects on economic development have been uneven and, at times, contradictory.Since the 1973 oil shock, Iran’s economic performance has been closely tied to its natural resource wealth. Moreover, a historical review of oil price trends reveals significant volatility, making it an unreliable source for financing national expenditures. According to theoretical foundations, natural resource rents should enhance the economic and social welfare of local communities. Ross (2007) notes that surprisingly little information exists about the relationship between natural resources and income inequality. However, it appears that resource-rich countries are, on average, neither more nor less unequal. Countries with abundant natural resources are often considered fortunate because these resources are valuable capital that can be transformed into essential infrastructure, fostering economic development and progress. Among natural resources, mineral resources—particularly hydrocarbons such as oil and gas—hold exceptional importance.The underground economy further complicates this relationship. As a parallel economic sector often linked to oil dependence, it diverts financial flows from formal oversight, undermining equitable wealth distribution. This not only deepens inequality but also erodes institutional quality and discourages human capital investment. In effect, overreliance on oil rents traps economies in cycles of distorted specialization and sluggish growth, perpetuating disparities.Despite these dynamics, few studies have examined the asymmetric effects of oil rents on income inequality or the mediating role of the underground economy—a critical gap this study addresses. Focusing on Iran (1978–2022), we investigate two central questions: First, does oil rent have an asymmetric effect on income inequality? Second, does the size of the underground economy influence how oil rent affects income inequality, and if so, how?Methods and MaterialFirst, the relative size of the underground economy is calculated using the MIMIC method. The structural equation model illustrates the relationship between the unobservable latent variable and observed indicators and causes. This model is widely used in various social sciences and economics. The MIMIC model consists of two main components: a structural equation and a measurement equation. As mentioned in the introduction, the primary objective of this study is to analyze and examine the asymmetric effect of oil rents on income inequality, with a focus on the role of the relative size of the underground economy in Iran. Therefore, the research model is designed to investigate and explain how increases and decreases in oil rents impact income inequality, emphasizing the relative size of the underground economy. To elaborate further, the reason for employing an asymmetric model lies in the limitations of symmetric or linear models, where the absolute magnitude of the independent variable's effect during an upward trend is assumed to be identical to its effect during a downward trend. In other words, in a symmetric estimation of oil rents impact on income inequality, it is conventionally interpreted that if an increase in oil rents leads to a rise (or fall) in income inequality by units, then simultaneously, a decrease in oil rents would result in a reduction (or increase) in income inequality by units. However, what occurs in reality may differ, as the effect of increasing oil rents on income inequality might not be identical to that of decreasing oil rents. In other words, in Iran’s economy, it is expected that income inequality will respond differently to increases in oil rents compared to decreases. Considering the explanations provided, as well as the potential delay in the impact of explanatory variables on income inequality and the influence of other variables affecting income inequality, a nonlinear autoregressive distributed lag (NARDL) approach is utilized. The asymmetric model specification is based on the study by Shin et al. (2014), which addresses the asymmetry in the coefficient of an influencing factor on the dependent variable under conditions of boom and recession. Drawing insights from the work of Pesaran et al. (2001), they define a model referred to as the nonlinear autoregressive distributed lag (NARDL) model.Results and DiscussionThe findings of the study, based on the estimation of the research model in the long run, indicate that: Firstly, positive shocks (increases) in oil rent have a favorable (negative) effect, while negative shocks (decreases) in oil rent have an unfavorable (positive) effect on income inequality. The difference in the magnitude of the impacts of positive and negative shocks highlights the asymmetric effect of oil rent on income inequality. Secondly, the favorable impact of increases in oil rent on income inequality diminishes as the size of the underground economy grows.Thirdly, the unfavorable impact of decreases in oil rent also weakens when the size of the underground economy increases. In a general summary and more detailed explanation, it can be stated that the underground economy acts as a double-edged sword in the relationship between oil rent and income inequality. Specifically, an increase in the size of the underground economy from 12.43% during increases in oil rent and 14.93% during decreases in oil rent makes the favorable (negative) impact of positive shocks in oil rent on income inequality unfavorable and turns the unfavorable (positive) impact of negative shocks in oil rent on income inequality into a favorable one. The inverse relationship between increases in oil rent and income inequality in Iran can be explained through channels such as increased government consumption expenditures, transfer payments and subsidies to lower-income deciles, and improved human development for the poor via government social spending. Furthermore, the results from the research model indicate that when disregarding the size of the underground economy, the favorable impact of increases in oil rent is less significant than the unfavorable impact of decreases in oil rent on income inequality, which confirms the presence of asymmetry in effects. Other findings show that real GDP per capita has an inverted U-shaped effect on income inequality, while unemployment has a positive effect on it.ConclusionGiven the findings of this study, it must be acknowledged that oil rents are an unreliable resource. Therefore, adopting policies to reduce the country’s budgetary dependence on rents derived from natural resources, including oil, is essential. Additionally, it should be emphasized that to maximize the favorable impact of oil rents on income inequality during positive shocks, policymakers must account for the relative size of the underground economy and implement measures to reduce its scale (e.g., streamlining government regulations and bureaucratic hurdles for formal business entry, reducing trade restrictions, fostering formal-sector employment through prudent management of oil revenues, etc.). Furthermore, since the adverse effect of oil rent declines—which lies beyond the managerial capacity of oil-producing countries (assuming the underground economy’s size is disregarded)—exceeds the favorable effect of oil rent increases, establishing a foreign exchange reserve or national development fund is imperative.
Esfandiar Jahangard; Alireza Jahangard; Negar Ebrahimi
Abstract
In recent years, with the increased availability of data and statistics, particularly multi-country input-output tables and firm-level microdata, along with advances in the data processing capacity of personal computers for managing these vast datasets, as well as information and communication ...
Read More
In recent years, with the increased availability of data and statistics, particularly multi-country input-output tables and firm-level microdata, along with advances in the data processing capacity of personal computers for managing these vast datasets, as well as information and communication infrastructure, the efficient shared use of databases for foreign trade analysis has become possible. The goal of this paper is to implement the gross export decomposition method by Borin and Mancini (2023), using a source-based approach and the perspective of the exporting country, as a foundational analysis for decomposing value-added in the gross exports of Iran’s economic activities.
The contribution of this paper to the economic literature on Iran can be summarized in the following three aspects: First, it utilizes data from the 2016 inter-country input-output database, including data on Iran, for empirical documentation. Second, it focuses on the most recent theoretical framework presented by Borin and Mancini (2023), with a source-based approach and country perspective, to decompose the value-added in the exports of Iran’s economic activities. Third, it offers a structural interpretation of the value-added decomposition of Iran's exports for the year 2016, which can be useful for researchers and policymakers in understanding the global value chains of Iran’s economic activities. The results show that Iran plays a small and fragile role in the global economy.
Introduction
The global economy has become increasingly interconnected, necessitating comprehensive tools to understand complex trade relationships. Traditional trade statistics, which rely on gross export values, often obscure the actual value added by countries. The emergence of inter-country input-output tables allows for a detailed examination of value-added flows within international trade networks. These tables track the production processes across different countries, shedding light on how value is added at each stage of production. This paper builds on the gross export decomposition framework developed by Borin and Mancini (2023), which enables a nuanced analysis of value-added in exports. By applying this framework to Iran's economic activities, we can gain a clearer picture of how different sectors contribute to the country's export economy. This approach provides a more accurate reflection of Iran's role in global value chains (GVCs), moving beyond traditional metrics that may understate or overstate its economic contributions.
The study utilizes the Inter-Country Input-Output(ICIO) database for the year 2016 which includes Iran, which provides comprehensive data on trade and production relationships among various countries. The ICIO database is particularly suited for this analysis as it captures the interconnected nature of global trade and production networks. The Borin and Mancini (2023) methodology involves decomposing gross exports into three main components: The domestic value-added (DVA), that is value-added exported in final or intermediate goods. This is part of the Domestic Content – the part of exports that originated in the country – and is also a measure of GDP in gross exports or in intermediates absorbed by direct importers. The foreign value-added (FVA) that is value-added contained in intermediate inputs imported from abroad, exported in the form of final or intermediate goods. This is part of the Foreign Content – the part of gross exports that originated abroad. The returned value-added is domestic VA in intermediates exported. By applying this decomposition method, we can analyze the contribution of various sectors to Iran's export economy. This analysis involves several steps:
Data Preparation: Extracting relevant data from the ICIO database for Iran and its trading partners.
Decomposition Calculation: Applying the Borin and Mancini (2023) method to decompose Iran's gross exports into DVA, FVA, and RDVA.
Sectoral Analysis: Examining the results to identify key sectors contributing to Iran's value-added exports.
Results and Discussion
The results reveal significant insights into the structure of Iran's export economy. In 2016, Iran's gross exports were composed predominantly of Domestic Value Added (DVA), reflecting the substantial contribution of domestic industries to the country's exports. The analysis shows that the oil and gas sector plays a crucial role in generating DVA, given Iran's abundant natural resources.
However, the study also highlights the presence of Foreign Value Added (FVA) in Iran's exports. This indicates that foreign inputs are integrated into Iran's production processes, demonstrating the interconnectedness of Iran's economy with global supply chains. For instance, machinery and equipment imported from other countries are essential for Iran's manufacturing sector, contributing to the FVA in its exports. The Returned Domestic Value-Added component, although smaller, provides interesting insights into the circular nature of some value-added flows. This component illustrates how certain domestic value-added returns to Iran after being processed abroad. For example, raw materials exported from Iran may be processed into intermediate goods in other countries and then re-imported for further manufacturing. The application of the Borin and Mancini (2023) value-added decomposition method provides a detailed and nuanced understanding of Iran's export economy. By distinguishing between Domestic Value Added (DVA), Foreign Value Added (FVA), and Returned Domestic Value Added (REF), this analysis offers a comprehensive view of how different sectors contribute to Iran's gross exports.
Conclusion
The study reveals that while Iran's export economy is heavily reliant on domestic industries, it is also deeply from oil and mining interconnected with global supply chains. Furthermore, the Returned Domestic Value-Added component highlights the circular nature of some value-added flows, illustrating the complexity of global trade relationships. For policymakers and researchers, these insights are invaluable. Understanding the composition of Iran's export economy can inform strategies to enhance domestic industries' competitiveness and better integrate into global value chains. Additionally, recognizing the role of foreign inputs in domestic production can guide policies aimed at improving the efficiency and resilience of supply chains. In summary, the value-added decomposition method employed in this study offers a robust framework for analyzing Iran's export economy. It provides a clearer picture of how domestic and foreign industries interact within global trade networks, offering valuable insights for enhancing Iran's economic performance in the context of global value chains.
Habib Morovat
Abstract
A substantial body of research highlights the presence of social preferences, their economic and political implications, and the varied conditions that influence their effects on the equilibrium and outcomes of human interactions. This study utilizes data from the Global Preferences Survey (GPS) to explore ...
Read More
A substantial body of research highlights the presence of social preferences, their economic and political implications, and the varied conditions that influence their effects on the equilibrium and outcomes of human interactions. This study utilizes data from the Global Preferences Survey (GPS) to explore how age and gender impact social preferences across Iran at both national and provincial levels. The findings from a multivariate regression analysis reveal that age positively and significantly influences trust and altruism, while it negatively and significantly impacts negative reciprocity, with no significant effect on positive reciprocity. Gender, on the other hand, shows a significant negative effect on trust, indicating that women tend to exhibit lower levels of trust. Additionally, income and education negatively and significantly impact trust but positively affect altruism and positive reciprocity, with no notable effect on negative reciprocity.
The study also presents a provincial ranking within Iran based on key elements of social preferences: trust, altruism, positive reciprocity, and negative reciprocity. According to the research findings, Iran scores above the global average in terms of altruism, trust, and reciprocity. Notably, Markazi, Lorestan, and Ilam provinces rank highest in trust, altruism, and reciprocity, respectively.
Introduction
An influential set of laboratory experiments has questioned the conventional wisdom among economists and the validity of Stigler's (1981) position that "when self-interest and moral values conflict, most of the time, self-interest theory will win." These studies are complemented by a whole body of theoretical research that examines the nature and economic consequences of "social preferences". The most important of these theories consider social preferences as a result of altruism, reciprocity, fairness, and inequality-avoidance, maintaining social image or other motives. Studies based on field experiments also confirm the results of laboratory studies (List, 2006 and Falk et al., 2018). Ignoring social preferences makes economists unable to understand basic economic questions. Without considering social preferences, it is impossible to understand questions such as the effects of competition on market outcomes, the rules governing cooperation and collective action, the effects and determinants of material incentives, contracts and optimal property rights arrangements, and the important forces shaping social norms and market failure (Fehr and Fischbacher, 2002).
Determining factors of social preferences can be different according to demographic, geographic and cultural characteristics. Studies have shown that older people tend to prioritize fairness and reciprocation behavior (Falk et al., 2018). Also, studies have shown that women are typically more cooperative and tend to be more than men (Crawson & Gnezzi, 2009 and Falk & Hermel, 2018). Research has shown that older people and women typically have more trust (Crowson Vegnizi, 2009 and Duhman et al., 2008).
In Iran, due to the diversity of culture and geographical conditions, it is important to investigate the role of demographic variables on social preferences. In this research, we examined the causal relationship between age, gender, income, and education with each of the components of social preferences at the national and provincial levels with a standard model and technique.
Methods and Material
In order to investigate the factors affecting social preferences, the required data and information have been collected using a questionnaire. The information related to the dependent and independent variables of this research was extracted from the valid questionnaire available in Falk et al.'s article (2018) and the GPS website. Information related to Iran has been extracted from more than 2500 participants from all provinces of the country. In order to investigate the causal relationship between age and gender with variables of social preferences, multivariate regressions have been used in general as follows:
Results and Discussion
Using Ordinary Least Squares (OLS) regression, we estimated a model to examine the significance of gender, age, and cognitive ability on various dimensions of social preferences, including trust in others, altruism, and positive and negative reciprocity, as well as an aggregated index of social preferences. The analysis was conducted both at the national level and across individual provinces. Table 1 presents the estimated coefficients and their significance, highlighting how each variable influences these social preference metrics across different contexts within the country.
Table 1: Model estimation results for the whole country
independent variables
trust
altruism
Positive reciprocity
Negative reciprocity
Social preferences index
Dependent variables
age
0.0787***
0.006***
0.0053
-0.016**
0.0058*
Squared age
-0.0001
0.00005
-0.00004
-0.0003
-0.0002
gender
-0.1293***
0.049
0.0018
-0.0615
-0.1242
income
-0.045**
0.029***
0.03***
0.018
0.015**
education
-0.010***
0.022***
0.033***
0.012
0.014**
math
0.0165**
0.0095
0.0224***
0.0305***
0.0818***
R-Squared
0.0451***
0.007***
0.0068***
0.0582***
0.0126***
Sample size
2406
2474
2478
2449
2373
Source: Research calculations
*, **, *** are significant statistics at the level of 10, 5, and 1 percent, respectively.
The models were tested for heteroskedasticity, and where it was detected in the residuals, a robust estimator was applied. Specifically, in the models for positive reciprocity and the social preferences index, the null hypothesis of homoskedasticity was rejected, necessitating the use of robust estimations. Ramsey's test was conducted to check for potential endogeneity arising from omitted variables or specification errors, and this test did not reject the null hypothesis in any of the models. Table 2 provides the goodness-of-fit test results for these models.
Table 2: The results of goodness of fit tests
Tests/ Models
Trust
Altruism
Positive reciprocity
Negative reciprocity
Social preference index
Breusch–Pagan
(Prob)
1.88
(0.17)
1.75
(0.18)
11.65
(0.0006)
2.52
(0.11)
3.87
(0.0491)
Ramsey Test
(Prob)
1.03
(0.38)
0.26
(0.85)
0.15
(0.92)
1.81
(0.14)
1.25
0.29
Source: Research calculations
Conclusion
In this research, an attempt was made to investigate the effect of demographic variables such as age, gender, income, and education on social preferences for the entire country and province. The results of multivariate regression showed that, firstly, people's age has a positive and significant effect on trust in others and altruism. This finding is consistent with the findings of most studies. However, age has a negative and significant effect on negative reciprocity, which shows that negative reciprocity decreases with increasing age. And finally, age does not have a significant effect on positive reciprocity. Secondly, gender only has a negative and significant effect on trust in others and has no significant effect on other social variables. In other words, women are less devoted to others than men. The findings of this study are not consistent with the findings of most other studies on gender. Because in most other studies, women are more social, more altruistic and have significant negative countermeasures compared to men. The cause of this issue can be related to the culture and religion and the role of women in the country, which needs to be studied more in this field. Thirdly, income and education have a negative and significant effect on trust and have a significant and positive effect on altruism and positive reciprocity and do not have a significant effect on negative reciprocity. The effect of income and education is very similar. Income and education have a negative and significant effect on trust and have a significant and positive effect on altruism and positive reciprocity and do not have a significant effect on negative reciprocity.
Failure to understand and identify factors influencing social preferences leads to a misunderstanding of people's economic behavior (Fehr and Fischbacher, 2002). Correct understanding and identification of factors affecting social preferences helps policymakers to act optimally in understanding the process of cooperation between economic factors, designing economic incentives, and designing social policies.
Shahryar Zaroki; Ahmadreza Ahmadi; Mehdi Hasanpour Varkolaei; Mohammad Reza Zare Chamazkoti
Abstract
This study investigates the impact of government subsidies on economic well-being in Iran, using both symmetric and asymmetric approaches. Economic well-being is first quantified using a composite index based on four components: consumption flow, wealth stocks, income distribution, and economic ...
Read More
This study investigates the impact of government subsidies on economic well-being in Iran, using both symmetric and asymmetric approaches. Economic well-being is first quantified using a composite index based on four components: consumption flow, wealth stocks, income distribution, and economic security. The study then applies an ARDL & NARDL model to assess the linear and non-linear effects of subsidies on economic well-being over the period from 1973 to 2022.
The findings reveal a significant decline in economic well-being from 1975 until the end of the Iran-Iraq War, followed by an upward trend until the Sixth Development Plan. The average index value increased from 20.9 in the First Plan to 60.3 in the Fifth Plan, but then fell to an average of 8 in the Sixth Plan. The share of subsidies in total government expenditure increased from 1973 to the end of the war and during the First to Fourth Development Plans, but decreased thereafter, particularly in the Sixth Plan.Long-term estimates indicate that both increases and decreases in subsidy expenditures directly impact economic well-being. However, the effect of subsidy reductions on economic well-being is more significant than that of increases, suggesting the presence of an asymmetric impact. Moreover, the analysis of the optimal subsidy level reveals that subsidies enhance economic well-being up to a threshold of 8.8% of government expenditure; beyond this point, increasing subsidies has a detrimental effect on economic well-being.Additionally, the study highlights a marked decline in economic well-being during the periods 1976-1989 and 2017-2022, with the post-JCPOA period witnessing a more substantial decline due to the intensification of sanctions.
Introduction
The issue of well-being and its improvement is one of the central concerns of societies, with politicians often claiming to prioritize the creation of well-being for their citizens. Economic well-being is influenced by numerous factors, including population size, economic complexity, globalization, exchange rate fluctuations, economic growth, unemployment, inflation, sanctions, production volatility, government size, and government spending. Empirical studies by Sowa and Edpri (2007), Nan and Zhang (2018), Sunita and Mahendra (2022), and Wu and Liu (2023) highlight the significant impact of government expenditures, such as subsidies, on both economic and social well-being. These studies establish a notable relationship between government spending and economic well-being.
Among the key factors influencing economic well-being, government expenditures, and specifically subsidized spending, play a critical role. These expenditures can directly or indirectly affect economic well-being. Consequently, analyzing changes in government expenditures, particularly subsidies, is crucial for policies aimed at promoting economic growth and improving well-being. Given the close relationship between these two variables, determining the optimal level and composition of government spending can have substantial implications for macroeconomic policy.
It is important to note that the relationship between government expenditures, subsidies, and the factors influencing them is not necessarily symmetrical. Rather, it may exhibit asymmetry. This study seeks to first calculate economic well-being over the past fifty years using a composite index. Second, it aims to analyze both the symmetric and asymmetric effects of subsidy expenditures on well-being in Iran from 1973 to 2022 through three separate models. The autoregressive distributed lag (ARDL) model, incorporating both linear and nonlinear approaches, is employed for model estimation. Additionally, the study explores how variations in subsidy spending impact economic well-being, particularly by distinguishing between the effects of subsidy increases and decreases.
This research is innovative in several ways. First, it uses a comprehensive economic well-being index, as opposed to the Amartya Sen social welfare index, over a more extensive time period (1973-2022), which covers significant political and economic events, including Iran’s development plans, the Iran-Iraq War, the revolution, and international sanctions. Second, while previous studies have not specifically examined the asymmetry in subsidy effects on well-being, this research distinguishes between the impacts of subsidy increases and decreases. Third, the study aims to determine the optimal level of government subsidy expenditures for maximizing economic well-being.
Method
For this study, the IEWB (Index of Economic Well-Being) is used as a comprehensive measure to analyze the economic well-being of Iran over the period from 1973 to 2022. The IEWB index incorporates four key dimensions: effective per capita consumption flow, wealth stocks, distribution of individual income, and economic security. Each of these dimensions is weighted based on its relative importance.The general formula for the IEWB index is as follows:
IEWB=CF+WS+ID+E
Where:
CF = Effective per capita consumption flow
WS = Wealth stocks
ID = Distribution of individual income
E = Economic security
To calculate the economic well-being index, each of these components is assigned a coefficient based on their relative importance. Following the methodology of Osberg and Sharp (2009) and prior studies, the coefficients are as follows:
4 for consumption (CF),
for wealth stocks (WS),
25 for income distribution (ID),
25 for economic security (E).
Given that the dimensions are measured using different units, each component is first normalized before calculating the weighted average. The normalization process ensures comparability across the dimensions, and it is carried out using the following formula:
Here, represents the normalized value, while and denote the minimum and maximum values of the respective dimension. Using this approach, the economic well-being index was calculated for the period from 1973 to 2022.
As mentioned in the introduction, the main goal of this research is to analyze and investigate the symmetrical and asymmetrical effects of subsidies on economic well-being in Iran. The research model focuses on examining how subsidies affect economic well-being, specifically distinguishing between the effects of subsidy increases and decreases. The asymmetric model specification follows Shin et al. (2014), who examined how coefficients of factors affecting a dependent variable may differ during periods of economic well-being versus recession. Building on Pesaran et al.'s (2001) work, they developed the non-linear autoregressive with distributed lag (NARDL) model. This study applies their pattern in two formats (symmetrical and asymmetric) to analyze our research variables. Additionally, a third model is specified to calculate the optimal ratio of subsidy to total government expenditure.
Results and Discussion
The present research investigates and analyzes the effect of subsidies on Iran's economic well-being based on symmetrical and asymmetrical approaches. Additionally, in a separate model (the third model), the optimal ratio of subsidy to government expenditure was calculated. For this purpose, economic well-being was first calculated using the composite index of well-being based on four dimensions for the period 1973-2022, and the coefficients were estimated using three patterns with ARDL & NARDL approaches.
The results of calculating the well-being index and describing the data show that the well-being index increased consistently from the first plan to the fifth plan, rising from 20.9 in the first plan sub-period to 60.3 in the fifth plan sub-period. Furthermore, after the third plan sub-period, the level of well-being remained higher than the average of the studied periods.
The long-run estimation results indicate that subsidies have a direct and asymmetric effect on economic well-being. The direct effect of subsidy decreases on economic well-being is greater than the effect of subsidy increases. Additionally, subsidies demonstrate an inverted U-shaped effect on economic well-being. The optimal ratio of subsidy to total government expenditure for maximizing economic well-being is 8.8%. When subsidies are
below this 8.8% threshold, increases in subsidies are associated with improved economic well-being; above this threshold, additional subsidies lead to decreased economic well-being.
Real GDP per capita and economic growth show positive effects on economic well-being, while inflation demonstrates a negative effect. Based on these findings, it is recommended that policymakers focus on policies to increase subsidy expenditures. However, given the significant negative impact of inflation on economic well-being, policymakers should carefully consider inflation when increasing subsidized expenditures. Non-inflationary methods should be prioritized when financing subsidized expenditures wherever possible.
Akbar Bagheri; Hasan Abagheri
Abstract
One of the basic requirements for sustainable growth and development is the existence of an efficient financial sector to finance production activities. In this regard, the present study has estimated the probability of bankruptcy of banks employing the Altman index and using evidence from ...
Read More
One of the basic requirements for sustainable growth and development is the existence of an efficient financial sector to finance production activities. In this regard, the present study has estimated the probability of bankruptcy of banks employing the Altman index and using evidence from the banking industry for 18 public and private banks in the period from 2016 to 2021. Using the panel data approach, the influencing factors in the probability of bankruptcy are also investigated. Estimates from the panel approach show that credit diversification is effective in reducing the probability of bankruptcy. Similar evidence shows that the probability of bankruptcy for private banks is equal to 68% and for public banks 70%. The calculation of the Herfindahl-Hirschman concentration index has also shown a value of 0.33 for Iran's private banks and 0.63 for state banks, so credits in private banks have a higher diversity than in state banks. According to the results of the research, more attention should be paid to diversifying credits in public and private banks, determining the optimal size of banks to take advantage of economies of scale, monitoring the central bank's compliance with Basel index standards and monitoring the maintenance of banks' cash balances for the unforeseen demand of the society.
Reza Maaboudi; Zeynab Dare Nazari
Abstract
This paper aims to study the relationship between financialization and the variables of income distribution and economic growth in Iran during 1988:q1 -2019:q4. To analyze the relationship, the continuous wavelet transform approach and to explain the results with empirical facts, the regression ...
Read More
This paper aims to study the relationship between financialization and the variables of income distribution and economic growth in Iran during 1988:q1 -2019:q4. To analyze the relationship, the continuous wavelet transform approach and to explain the results with empirical facts, the regression approach with Mixed Data Sampling (MIDAS) have been used. Results of the wavelet transform show that, in the short-run, there is a positive coherency between financialization and income inequality; so that during 1989-2007 and 2014-2019, financialization is the leading and cause of income inequality. Also, in the short run, there is a negative coherency between financialization and economic growth; in a way that during 1989-2019 financialization is the leading and cause of economic growth. The results of the MIDAS approach also show that in addition to financialization, the variables of government expenditures, economic growth, inflation, and sanctions have a positive and significant effect, and the policy of targeted subsidies has a negative and significant impact on income inequality. Also, financialization, government expenditures, income inequality, inflation, and economic sanctions have a negative and significant effect, and physical capital, employment, and degree of trade openness have a positive and significant effect on economic growth. As a result, the phenomenon of financialization accompanied by the imposition of economic sanctions and government policies, on the one hand, leads to an increase in the wage and income gap between the real sector and the financial sector, and, on the other hand, their effects leave a negative impact on economic growth by the diversion investment to unproductive activities.
Mahdiyeh Saei
Abstract
The present study seeks to investigate the effect of climate change on exports and imports and the welfare of urban and rural consumers in Iran. For this purpose, the CGE is used as a tool for analysis and The Social Accounting Matrix (SAM) of 1390 as a database. In this study, activity and goods ...
Read More
The present study seeks to investigate the effect of climate change on exports and imports and the welfare of urban and rural consumers in Iran. For this purpose, the CGE is used as a tool for analysis and The Social Accounting Matrix (SAM) of 1390 as a database. In this study, activity and goods accounts were split into cereal accounts, other agriculture, industry, and mining and services. The results of the model, using three simulation scenarios, showed that as a result of climate change, the production of all sectors excluding industry and mining would be reduced, which would result in higher prices for cereals and lower prices for other activities. In addition, grain exports will decrease in different scenarios and exports of other goods will increase. On the other hand, cereal imports will decrease as imports and other commodities decrease. In this regard, the welfare of urban and rural households will also decrease, which is more pronounced for urban households. According to the results, the macroeconomic effects of these scenarios are the reduction of nominal and real GDP, total absorption and private consumption of households.
Parviz Davoudi; Hassan Sabzi Khoshnami
Abstract
Income inequality has received much attention from economists and policymakers as one of the components of economic development. On the other hand, the difference between developed and developing economies can be checked in the efficiency of their financial systems. This study investigates the ...
Read More
Income inequality has received much attention from economists and policymakers as one of the components of economic development. On the other hand, the difference between developed and developing economies can be checked in the efficiency of their financial systems. This study investigates the effect of financial development on income inequality in Iran using the threshold regression method during 2020-1967. The results show that the effect of financial development of the banking sector and the stock market on income inequality has a threshold limit. in model one, the financial development of the banking sector before and after the threshold has a significant and negative effect on inequality. In model two, stock market financial development has significant and negative effect on income inequality before the threshold but not significant effect after the threshold. However, there is insufficient evidence to support the effect of financial development on income inequality in the form of Greenwood and Jovanovic's inverse U hypothesis.
hojjat izadkhasti
Abstract
Regional inequality has economic, social and cultural dimensions. One of the main concerns of planners and policymakers in economic development programs is reduction of poverty and inequality based on provincial income per capita. Therefore, through budget allocation tools, the government can reduce ...
Read More
Regional inequality has economic, social and cultural dimensions. One of the main concerns of planners and policymakers in economic development programs is reduction of poverty and inequality based on provincial income per capita. Therefore, through budget allocation tools, the government can reduce inequalities in provincial incomes per capita and create more balance among provinces. In this paper, the effects of inequality in the allocation of provincial budget on provincial inequalities are estimated using dynamic panel data method for period 2005-2016 in 30 Iranian provinces. The estimation results indicate that the increase in inequality of provincial capital formation budget has reduced inequality in provincial income. This result indicates an increase in government investment in infrastructure and a higher share of government development budget in less-developed provinces. Also, with increasing inequality in provincial current per capita budget, inequality in regional income has increased; because an increase in inequality of current per capita budget in the provinces can lead to unbalanced public service provision and an increase in inequality of income per capita.
Ali Hussein Samadi; Ebrahim Hadian; parviz rostamzadeh; hamzeh sheikhiani
Abstract
The main purpose of this paper is to investigate the effect of trade liberalization on income inequality with consideration of socio-institutional factors emphasized by resistance economy policies in Iran. To meet this end, the Decaluwe et al. (2013) model has been adjusted and it is solved based on ...
Read More
The main purpose of this paper is to investigate the effect of trade liberalization on income inequality with consideration of socio-institutional factors emphasized by resistance economy policies in Iran. To meet this end, the Decaluwe et al. (2013) model has been adjusted and it is solved based on Social Accounting Matrix data of year 2011. The results show that in current institutional situation of Iran, the reduction of tariffs in the agriculture, horticulture, forestry and mining sectors can reduce inequality and tariff reduction in sectors of food industry, low technology industries, high technology industries, higher education, transportation and other services will increase inequality in urban and rural areas. By reducing tariff rates in mid-tech industries, inequality in urban and rural areas initially decreases and then increase. Reducing tariffs in oil and gas and healthcare sectors does not affect inequality in urban and rural areas. It is also shown that in the case of implementing resistance economy policies and improving institutional quality, tariff rate reduction in all sectors of production will reduce inequality. Reducing tariff rates in primary and secondary education sectors, housing and other sectors that de not have any link to outside world has no effect on inequality, both in the current institutional situation and in the case of institutional quality improvement as a result of implementing resistance economy policies. Therefore, it is suggested that attention be paid to improvement of institutional quality in the country, along with the implementation of resistance economy policies.
Reza Zamani
Abstract
The main purpose of this paper is to study social order in Iran between two revolutions (1906-1979). Generally, there are two types of social order: limited- and open-access. Limited-access (or Natural State) social order is sub-categorized into three types of fragile, basic and mature. It can be shown ...
Read More
The main purpose of this paper is to study social order in Iran between two revolutions (1906-1979). Generally, there are two types of social order: limited- and open-access. Limited-access (or Natural State) social order is sub-categorized into three types of fragile, basic and mature. It can be shown that between constitutional revolution and 1921 coup, Iran was caught in fragile natural state. Then, from this coup to political regime change from Qajariyyeh to Pahlavi (1921-1925), Iran was switching from fragile to basic natural state. Iran’s social order in Reza Shah era (1925-1941), was basic natural state and economic growth achieved in a closed political sphere which did lead to double imbalances. From 1941-1946 Iran experienced a sharp backward move to fragile social order. After that, social order was switching from fragile to basic natural state during 1947-1953. During period 1953-1963, basic natural state was stabilized. There were a lot of attempts to politically control the military (as the last transition condition to open-access social order) during 1941-1963, but these efforts finally failed. The golden decade of economic growth in Iran happened between 1963 to 1972. In this decade, economic system was switching form basic to mature natural state. However, political access was under tight restriction and control. Therefore, double imbalance of economic and political systems emerged again. In 1973-1979 the country was going back from basic to fragile natural state, and dominant coalition threatened and finally was overthrown completely by Islamic revolution (1979).
alaeddin ezoji; Abbas Assari Arani; mohmmad reza vaeze mahdavi; GholamReza K. Haddad
Abstract
The relationship between human capital and labor productivity is always important for economists. Considering the relationship between these two will also be remarkable in microeconomic studies. Meanwhile, the impact of different dimensions of human capital on labor productivity can be a measure ...
Read More
The relationship between human capital and labor productivity is always important for economists. Considering the relationship between these two will also be remarkable in microeconomic studies. Meanwhile, the impact of different dimensions of human capital on labor productivity can be a measure of actual effect of human capital on productivity. The aim of this paper is to examine the effects of various dimensions of human capital (education, health, and experience), on labor productivity based on individual characteristics in Iranian economy. We use micro data (Cost–Income Survey of Urban Areas - 2013) and estimation of Quantile Regression (QR) econometric technique. For this purpose, net income (wage and salary) for employment in private sector is used as proxy of labor productivity. Our results show that in different quantiles, all three dimensions of human capital have a positive and significant effect on productivity of labor force employed in Iranian private sector. Meanwhile, in different quantiles, health indicators of human capital are more volatile than other dimensions of human capital, i.e. education and experience. So, in lower quantiles (Ql), the response of labor productivity to health indicators is more than higher quantiles (Qh). Because of that, any kind of health shock may have a greater effect on labor productivity in lower-income groups. This result shows the importance of health capital in social security, insurance and health systems and reminds us to improve the productivity of working people by means of better health capital.
Siab Mamipour; Elham Mogaddasi
Abstract
This paper aims to study the role of gold, stock and foreign currency as hedges against inflation in Iran based on monthly data over period 2000-2016 by using a novel approach with nonlinear autoregressive distributed lags (NARDL). To achieve this goal, the effect of positive and negative inflation shocks ...
Read More
This paper aims to study the role of gold, stock and foreign currency as hedges against inflation in Iran based on monthly data over period 2000-2016 by using a novel approach with nonlinear autoregressive distributed lags (NARDL). To achieve this goal, the effect of positive and negative inflation shocks on price of these assets is estimated separately. The results show that all assets (foreign currency, gold and stock) are hedges against inflation in Iranian economy. As inflation rate increases, the prices of these assets also increase, but the magnitude and type of their hedge against inflation vary in different time horizons. The results show that the effects of both positive and negative inflation shocks on gold price are symmetric in the short-run, but in the long run, the effect of positive inflation shocks on gold price are more than negative shocks. The results of the inflationary coverage of foreign currency show that the effects of the positive and negative inflation shocks on it are asymmetric in the short-run and long-run; while these effects are symmetric for stocks in both short- and long-term. Furthermore, stocks is a proper hedge against inflation in the long run and not only it maintains purchasing power, but also it increases value of investors’ assets. Moreover, the inflationary coverage of foreign currency and gold are the same and less than rising inflation, but exchange rate is a hedge in the short-run and gold plays the role of hedge against inflation in the long-run.
Esfandiar Jahangard; parisa mohajeri; leila momeni
Abstract
The subject of labor force productivity changes during business cycles has been the focus of much debate among macroeconomics, which has gained less attention among studies focusing on Iranian Economy. In the study, we have aimed at empirically examining the role that labor force productivity fluctuations ...
Read More
The subject of labor force productivity changes during business cycles has been the focus of much debate among macroeconomics, which has gained less attention among studies focusing on Iranian Economy. In the study, we have aimed at empirically examining the role that labor force productivity fluctuations play during economic cycles in the Iran using time-series data for the period of 2005Q2-2015Q1 by applying an autoregressive distributed lag (ARDL) model. In order to estimate relations, we have separated fluctuation and trend components based on Hodrick-Prescott filter. Based on our results, it is suggested that labor force productivity moves in alignment with GDP and increases in expansion periods and decreases in recession periods which indicate pro-cyclical behavior of labor force productivity in Iranian Economy. Second, in the last seasons of an expansion period, the role of labor force productivity fluctuations decreases in gross domestic product fluctuations which is along with the theory.
Saeed Moshiri; Maryam Parsa; Liela Darougar
Abstract
As a general-purpose technology, information and communication technology (ICT) leads to increasing productivity and economic growth in different sectors. Iran, as a semi-industrialized developing economy, has recently made relatively high level of investment on ICT in different sectors of the economy. ...
Read More
As a general-purpose technology, information and communication technology (ICT) leads to increasing productivity and economic growth in different sectors. Iran, as a semi-industrialized developing economy, has recently made relatively high level of investment on ICT in different sectors of the economy. In this paper, we investigate the relationship between ICT sector and other sectors of the economy using an input-output table. We construct an input-output table with 37 sectors including ICT sector, using the updated IO table for year 2010. ICT goods production comprises 1.8 percent of total goods production and ICT service is 1.32 percent of the total service production. The results show that one unit increase in final demand for information technology (IT) products will increase total output by 1.63 units and one unit increase in final demand for communication technology (CT) products will increase total output by 2.18 units. The greatest impact of ICT in manufacturing sectors will be respectively in food and beverage, basic metal, and chemical products, and in the services sector in the wholesale, retail sale, financial intermediates, and real estate services. We also calculate the Average Propagation Length (APL) of the changes in the ICT final demand. The results indicate that the average propagation length of the changes in the ICT final demand is 1 for the services sector and 2 for the manufacturing industries.
Abolfazl Pasbani; ali cheshomi; meisam pileforoush
Abstract
This article has surveyed effect of political institutions on performance of oil funds and seeks to make a meaningful contribution to the literature on the use of oil funds in resource-dependent countries, by proposing that what differences in political institutions, cause differences in performance ...
Read More
This article has surveyed effect of political institutions on performance of oil funds and seeks to make a meaningful contribution to the literature on the use of oil funds in resource-dependent countries, by proposing that what differences in political institutions, cause differences in performance of oil funds in Iran, Norway and Saudi Arabia. In situations that institutional framework causes maximization of benefits with long-term decisions, the mechanism of oil funds are successful. And in situations that institutional framework causes maximization of benefits with short-term decisions, the mechanism of oil funds are not successful. Institutional framework in full democracies and paternalism authoritarian regimes lead to the long-term decisions, but institutional framework in flawed democracies leads to short-term decisions. It seems that in Iran, motivations implicit in institutional structure push politicians to take short-term decisions instead of long-term decisions, such that politicians are inclined to maximize their own interests and consider short-term period. That has been of the most important factor in failure of Iran's Foreign Currency Reserves Account or National Development Fund.
Mohammad Reza Farzaneh; Ali Bagheri; Mohammadhossein Ramezani Ghavamabadi
Abstract
Unsustainable withdrawal of groundwater resources has resulted in increasing spread of economic, social and ecological consequences in Iran. Particularly, since the adoption of "Protection of groundwater resources of Iran Act" (passed in 1966), numerous policies and laws with the aim of protecting groundwater ...
Read More
Unsustainable withdrawal of groundwater resources has resulted in increasing spread of economic, social and ecological consequences in Iran. Particularly, since the adoption of "Protection of groundwater resources of Iran Act" (passed in 1966), numerous policies and laws with the aim of protecting groundwater resources have been passed and enforced; however, the level of groundwater table has been continuously decreasing while the number of prohibited plains have been increasing. So, the question arises that where the problem is originated from; and despite nearly 50 years of policy-making, legislation and implementation, why are groundwater resources not protected, but the situation has been getting worse and worse. Relying on the premises of institutional theories, the present paper will address the context and features of water bodies based on three components of mental models, structures, and the system of benefit and power distribution. The results show that the components of institutional environment are inconsistent with the context of legality.
Mansour Zarra Nezhad; Elaheh Ansari; Masood Khoda Panah
Abstract
Information constitutes the main basis for decision making. Sometimes the amount of information obtained is so huge that the inappropriate use of unanalyzed information will lead to making wrong decisions. Defining practical indices and the quantification of quality indicators in different domains can ...
Read More
Information constitutes the main basis for decision making. Sometimes the amount of information obtained is so huge that the inappropriate use of unanalyzed information will lead to making wrong decisions. Defining practical indices and the quantification of quality indicators in different domains can be of remarkable help to discover fundamental problems, set goals, and choose the best way to achieve them. Islamic economy could be one of these areas. In this study, through following scientific principles, the composite index of Islamic economy in Iran from 1995 to 2012 was defined and estimated. In fact, it is for the first time that a long-term performance of a country is examined. The results show that the absolute value of the index has not changed significantly in the course of 18 years under study, and there have been fluctuations in a short run. Reducing unemployment and inflation rates, promoting the culture of the using non-interest-bearing deposits (Gharz-ol-Hasane), as well as reducing bank interest rate comprise strategies for improving this indicator in Iran.
Esmaeil Mirza’i; Teymour Mohammadi; Abbas Shakeri
Abstract
In this paper we assess the interaction between different macroeconomic variables and the quality of loan portfolio of banks in Iran by using a panel vector autoregressive (PVAR) method that controls for bank-level characteristics. For this purpose, we use a quarterly panel data of banks and some ...
Read More
In this paper we assess the interaction between different macroeconomic variables and the quality of loan portfolio of banks in Iran by using a panel vector autoregressive (PVAR) method that controls for bank-level characteristics. For this purpose, we use a quarterly panel data of banks and some of the most important macroeconomic variables over the period 2002-2013. Variables of this research are the ratio of non-performing loans (NPLs) to total loans as the index for quality of loan portfolio of banks, GDP growth, real lending interest rate, monetary base and growth rate of banks’ loan. We find that a positive shock to real lending interest rate and loan growth rate improve the quality of loan portfolio of banks. However, printing more money by central bank (a positive shock to monetary base) leads to a drop in portfolio quality, while a positive shock to GDP growth rate doesn’t have a significant effect on NPLs. On the other hand, the feedback effect from NPLs on macroeconomic variables is verified, as a positive shock to NPLs (worsening the quality of loan portfolio) causes to exacerbate economic recession, to increase monetary base, and to decrease loan growth rate significantly, but it doesn’t have any significant effect on real lending interest rate .
Masoud Nonejad; Maryam Haghjoo
Volume 14, Issue 53 , July 2014, , Pages 63-82
Abstract
As economic integration in East Asia progresses, trade patterns within region are displaying an ever–greater complexity. Although inter–industry trade still accounts for the majority, its share in overall trade is declining. Instead, intra–industry trade (IIT), which can be further ...
Read More
As economic integration in East Asia progresses, trade patterns within region are displaying an ever–greater complexity. Although inter–industry trade still accounts for the majority, its share in overall trade is declining. Instead, intra–industry trade (IIT), which can be further divided into horizontal IIT (HIIT) and vertical IIT (VIIT) is growing in importance. In this paper, we set out and examine different kinds of intra-industry trade between Iran and G-8 member states by comparing the Greenway, Hine and Milner (1994) and Fontagne and Freudenberg (1997) approaches to disentangling vertical and horizontal intra–industry trade. Then we introduce and examine a new index from Azhar and Elliott to define product quality types between Iran and G-8 members for the time of 2001-2009. Result shows that a significant share of Iran’s industry trade with G-8 state members has been assigned to vertical intra industry trade. With regarded to Azhar and Elliott index, the main share of intra-industry trade consists of low quality goods.
Esfandiar Jahangard; Afrouz Azadikhah Jahromi
Volume 13, Issue 51 , January 2014, , Pages 81-111
Abstract
In this paper we identify the production chains of Iranian economy by using average propagation length (APL) index. In our imprical investigation, we have applied the mentioned methodology to the 2000 input-output table of Iran. In order to obtain a clear overview of the production chains in Iran, the ...
Read More
In this paper we identify the production chains of Iranian economy by using average propagation length (APL) index. In our imprical investigation, we have applied the mentioned methodology to the 2000 input-output table of Iran. In order to obtain a clear overview of the production chains in Iran, the table was aggregated to 6 sector level. At first we calculate the backward and forward linkages and APLs, and then we visualize the production chains for Iranian economy. As a second application we have considered the linkages, APLs and production chains at a more detailed level. For this purpose, we have used the 28-sector classification. The results for the backward and forward linkages of each sector indicate that industry and electricity, gas and water supply are known as key sectors. Also it was found that largest average forward APL value belongs to agriculture and mining, and smallest value belongs to services and construction. Likewise, the largest average backward APL value is observed for construction and agriculture, and smallest value oserverd for mining and services. It should also be noted that in both applications mining located at the beginning of the production chain o Iranian economy.
Hassan Heydari; HamidReza Faalju; Fatemeh Karami
Volume 13, Issue 49 , July 2013, , Pages 151-176
Abstract
The price index of shares of companies accepted in the Tehran Stock Exchange (TSE) is one of the main variables in evaluating macroeconomic performance of Iranian economy. One of the factors affecting stock price index of developing countries like Iran, that has high degree of volatility, ...
Read More
The price index of shares of companies accepted in the Tehran Stock Exchange (TSE) is one of the main variables in evaluating macroeconomic performance of Iranian economy. One of the factors affecting stock price index of developing countries like Iran, that has high degree of volatility, is exchange rate uncertainty.The main objective of this paper is to investigate the effects of exchange rate uncertainty on price index in the TSE for the period of 1994-2009 using monthly data. In this regard, first, an index of exchange rate uncertainty is calculated using EGARCH models. Then, in order to obtain the relationship between uncertainty in real exchange rate and the stock price index, Bounds test approach is applied to the relationship between level data. The results show that in both long-run and short-run, there is a negative and significant relationship between the exchange rate and stock prices. Moveover, real exchange rate uncertainty has a non-significant negative effect on stock price in short-run. In the long-run, the relationship between real exchange rate uncertainty and stock price is negative and significant. The results of Granger causality test also show that bidirectional causality exists between the real exchange rate and real exchange rate uncertainty in the short-run. While we could not find such an interactive relationship between other variables in the short-run, an indirect causality exists from exchange rate and exchange rate uncertainty to the stock price in the long-run.
Saeed Moshiri; Mohammad Nadali
Volume 13, Issue 48 , April 2013, , Pages 1-27
Abstract
The banking structure in Iran has undergone dramatic changes for the past three decades going from a mixed private-public banking system to a complete state-owned banking system. Although banking crisis such as bank panic and bank run has never been observed in Iran, the money market pressure index ...
Read More
The banking structure in Iran has undergone dramatic changes for the past three decades going from a mixed private-public banking system to a complete state-owned banking system. Although banking crisis such as bank panic and bank run has never been observed in Iran, the money market pressure index shows that the banking system has experienced crisis in various times. In this paper, we use the banking crisis data derived by Moshiri and Nadali (2010) to estimate the determinants of the banking crisis in Iran, using a Logit model for the period 1971-2008. The estimation results show that inflation, short term interest rate, and the ratio of domestic credit to private sector to GDP are the main factors affecting banking crisis in Iran. Moreover, the results indicate that the relationship between inflation rate and the banking crisis is U shape. The exchange rate does not have a significant effect on the banking crisis as the Iranian banking system is not heavily involved in the international financial markets and is not strongly connected to the international banking system.
Majid Sameti; Hassan Karnameh Haghighi
Volume 13, Issue 48 , April 2013, , Pages 121-145
Abstract
This study aims primarily at investigating the impact of macroeconomic instability on lending behavior of banking sector in Iran using data on commercial banks and macroeconomic instability from 1974 to 2009. Our results under the Co-integration and Vector Error Correction Modeling framework show that ...
Read More
This study aims primarily at investigating the impact of macroeconomic instability on lending behavior of banking sector in Iran using data on commercial banks and macroeconomic instability from 1974 to 2009. Our results under the Co-integration and Vector Error Correction Modeling framework show that bank lending has a long-run relationship with macroeconomic instability. In other words, the long-term increase in macroeconomic instability indicators would be associated with reduction in commercial bank lending. In addition, an increase in the natural logarithm of assets of commercial banks (as a proxy of bank size), have a significant effect on the lending behavior of commercial banks. The results also show that although the ratio of deposits to capital and lending behavior of commercial banks are interacted with each other in the long run, but in the short term the error of balance does not adjust itself. Simply saying, although the ratio of deposits to capital has a long-run effect on the lending behavior of commercial banks but it is not affected by lending behavior of commercial banks. In fact, the variable of deposits to capital ratio is weak exogenous when compared with other variables.
