Journal of Economic Modeling Research

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  The aim of this study is to review the causal relations between TFP growth and inflation as one of the attracting issues in Macroeconomic literature. For the first time in Iran, we have used the wavelet decomposition technique to study this relation. Both TFP growth and inflation series between 1960-2006 are decomposed up to three levels. Our analysis of causality relations between all the composed and decomposed series shows that though no statically meaningful effect between original series has been proved, there are some negative relations between decomposed series in first and second level. Moreover, our study reveals some previously unknown spillover effects between various frequencies of both series as explained in paper. Finally, on the basis of relations founded between decomposed series of inflation in different frequencies, we introduce a new instrument to measure the volatility of inflation.

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  The intensive effects of “targeted subsidies plan” and its implementation and that of the price of energy carriers on macroeconomic variables such as private consumption and Gross National Product, therefore increase in the price of energy carriers and the relevant issues have been debating and discussing for a long time. Regarding the significance of the issue and also its effect on the economic and society welfare, further and more comprehensive investigations into this subject seems to be necessary. This paper is presented with a review of previous studies and then explores the effect of the increase in the price of energy carriers on the three important macroeconomic variables, i.e. GDP growth, inflation and private consumption in the context of a structural vector regression to model SVAR. The results show that due to implementation of this plan, the economic growth and the private consumption decrease but the inflation will increase. The results showed that, the energy price index shocks the most influence on inflation variation are explained so that voters, in the medium term and long-term changes and about 40 percent of fluctuations in inflation, energy price shocks is described. Other findings of this study is that, in the long-term energy price shocks indices respectively about 20 and 11 percent of the fluctuations in private consumption and gross domestic product by the explained. It should be noted that all results, without considering the effects of resource redistribution payment received from government subsidies are.

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The characterization of memory effects in crude oil markets is an interesting issue that has attracted the attention of researchers from different disciplines, from econophysics to more classical economics. The importance of the problem relies in the fact that the departure from uncorrelated behavior would imply the presence of not-random effects which, in principle, can be exploited for arbitrage. This paper tries to contribute into the issue by estimating the memory effects by means of different parametric, semi-parametric, and non-parametric methods. In the other words, this paper provides analysis on the memory of the oil markets measured via the fractional integration parameter (d) by estimating it with various methods such as the MLE, NLS, GPH, Whittle, Lo, Hurst Exponent and Wavelet. To achieve this goal, we use the daily time series for WTI and Brent spot crude oil prices as well as 3-month futures, and further divide them into yearly subsections to obtain the historical series of memories. Results of the whittle and wavelet estimations, which are better suitted for this analysis, show no evidence of a long memory process. However, the oil price time series exhibits a nonstationary mean-reverting behaviour. Note that in this paper the behaviour of memory is our concern instead of the memory value itself. The results of memory changes trend shows that memory of international oil markets does not have an important trend change. In the other words, in our study period the efficiency of the market does not have an important decline or increase.

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Industrial energy demand analysis has always been one of the leading fields of research in economics. This issue is more critical in the case of developing countries especially those with transition experiences. In this paper, third generation of dynamic factor demand models for the Iranian manufacturing industries is estimated to analyze the speed of adjustment in factor demands. Data which is used in this study is an Iranian industrial plant based on two-digit international classification code during 1374-1386. The translog functional form is used as model specification. The main findings are the complementary relation between energy carriers, electricity, and capital and low adjustment speed of capital stock. In Iranian manufacturing industries, demand for energy carriers and capital, with expansion of manufacturing activities and technological change has increased, while the demand for labor has decreased.

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This study examines the social cost of banking industry in Iran (17 governmental and private banks) in an unbalanced panel data model. To conduct estimations, two different approaches were taken: 1- Welfare Triangle approach 2- Libenstein’s approach. In the former, welfare triangle is measured assuming banking industry operating in full technical efficiency however, the latter includes both the effect of welfare triangle and the cost of likely technical X-inefficiency. The result of the first method showed that the social cost of banks in Iran is little, amounting to be less than 1 percent of GDP in 2008 while within the same period, the second method resulted in 4 percent of GDP, as the social cost of banks in Iran.

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In this article the relationship between market return and volatility is examined by applying out- of- sample methodology and ARCH (M) class models in the Tehran Stock Exchange (TSE) and international stock exchanges. The results are inconsistent with portfolio theory implications in NASDAQ, ISE and TSE. However I found only negative relationship between unexpected volatility and monthly returns in most of international exchanges. I didn’t also find any significant relationship between forecasted volatility and monthly returns. The results contradict the asset pricing theories which explain a positive relationship between volatility and return. Although there are low coefficients of determination for all regressions, asymmetric volatility of return hypothesis explains this relationship in the sense that a decrease in stock price (negative return) increases the financial leverage of companies leading to more risky stocks and an eventually increasing volatility.

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The Poverty measurement and its determinants are the most important factors in poverty alleviation programs. In this paper, we estimate poverty line and its dimensions by using Linear Expenditure System. To that end, we use household level data from the Statistics Center of Iran during the period of 1994-2008. We examine the main determinants of poverty for urban households using a probit model. In this model, we assess the impact of key household characteristics on poverty. The results show that the poverty likelihood decreases if the educational level of the head of the household increases. In addition, the chance of being poor declines in a household headed by a male. The age of the head of the household, the ratio of income earners in the household, and the household size are other factors that have a significant role in the probability of being poor.

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This paper focuses on the role of uncertainty about the number of surviving children. The survey discusses the effects of declining mortality rates on fertility, education and economic growth. The construction of the paper is an OLG model in which individuals make choices about fertility decision over their lifetimes subject to uncertainty about the immortality. The simulation of model using actual changes reveals the fact that if the uncertainty about child survival enters to growth model, the population becomes an inverted u-shaped function of income per capita. As the mortality rate and thus uncertainty falls, the precautionary demand for children decreases. Furthermore, lower mortality encourages investment in children’s education .Also the calibrated version of the model using realistic estimates demonstrates that at low levels of income, population growth rises leading to Malthusian steady-state equilibrium, whereas at high levels of income population growth declines leading to a sustained growth steady-state equilibrium.

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The theoretical literature of economic growth (endogenous and exogenous growth model) and empirical evidence in developed and developing countries show that without financial reform, sustainable development is impossible. The positive effects of financial sector development on economic growth and developments in the international financial sector make a more important issue. Some economists believe that financial reforms through increasing the level of savings and investment can provide economic growth. Also, some economists believe that financial reform by international capital mobility and technology transfer can cause income convergence among countries. This study investigates the theoretical foundations of financial development, financial system and its functions, and also the analysis of the effect of financial reform on economic growth and creating income convergence among selected Islamic countries during 2008-1979. Estimation results show that financial reform through liquidity has direct and significant impact on economic growth. The crossover effect of economic growth and liquidity has direct and statistically significant effect on income convergence.

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Banks play an important role in many modern economies. The main functioning of banks is to reduce the information problems between lenders and borrowers. The experiences show that banks with a powerful balance-sheet have a better ability to isolate their lending activities from monetary shocks. So, the balance-sheet items of commercial banks play an important role in their sensitivity to the monetary downturns. This paper has two distinguishing features compared to other papers. First, we examined the indirect effects of monetary policy on bank lending through the balance-sheet items of the Iranian banks. Second, we have used two separate samples private and public banks, because their organizational systems have significant differences. Our hypothesis is that the monetary policy can indirectly affect the public and private banks’ lending through their balance-sheet items. Our results show that the monetary policy has no direct but indirect effects on bank lending in Iran.

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The ability of OLG models in analyzing and simulating the various fields of an economy, such as the investigation of endogenous growth policies, the development of intergenerational equity criteria and the reform of social security system, has caused these models to have a special position among economists in recent decades. However, difficulties in quantifying these models and analyzing their stability properties have led them to remain only theoretical and receiving less attention from empirical viewpoints. This paper uses the proposed method by Auerbach and Kotlikoff to estimate a 55-period overlapping generations model. Then due to failures of the Iran’s Pension System, it analyses and simulates Pension System within overlapping generation’s model with heterogeneous agents living in 55 periods. Thus we study the effects of transition from the Pay-As-You-Go Pension to the Fully Funded Pension System in the process of capital accumulation, national production and national consumption. The findings indicate that the individual optimal consumption-saving behavior varies under different social security systems. The results of the simulation model show that in addition to increasing the personal financial assets, Fully Funded Pension System provides a higher physical capital accumulation for the economy than that of ‌Pay-as-you-go Pension System. In addition to higher levels of national consumption and production, the transition to the new system causes people to have more incentive to stay in the labor market and to complete their career because they have higher labor income than the old pension system.

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The investigation of determinants in Gross National Saving behavior especially effect of corruption, is one of the important issues in macroeconomics literature. For this purpose, we use the corruption perception index in dynamic panel data approach (Arellano and Bond Method). The Empirical results indicate that the corruption perception index (reduction of corruption) has positive and significant effect on the gross national saving. The main results of model estimation for two groups of oil and non-oil countries of MENA, shows that in oil countries the elasticity of gross national saving is more than of non-oil countries and reduction of corruption can be increase the national saving in oil countries. Moreover the results of model estimation shows that the inflation rate has negative effect and real per capita income and terms of trade variables have positive and significant effects on the gross national of saving in these countries.

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The purpose of this article is to study the factor content of trade in Iran. To improve the trade affair, Iran needs a suitable model for production, export and import of required goods. Factor content of trade detects and amplifies it to pay. In this paper using (HOV) model and input-output (IO) we evaluate factor content of trade in different sectors in 1991-2001. The results show that Factor content of trade in 67 percent of the activities (28 sections) has been negative and 33 percent of the activities (13 sections) are positive

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The Phillips curve usually has been estimated in a linear framework which implies a stable constant relationship between inflation and unemployment. Some of the studies claim that the slope of the Phillips curve is a function of macroeconomic conditions and also the relationship is asymmetric. This article deals with a smooth transition regression model for relationship between inflation and unemployment for Iran, during the period of 1971 -2007. Smooth transition regression model is a non linear time series regression model which could be considered as developed form of regime switching regression model. Results show that there is a negative and nonlinear relationship between inflation and unemployment in short-term. Regarding this result it's highly important for policy makers to be able to make a relationship between these two variables

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Intermediate goods are another produced factor of production, like capital. Considering intermediate goods in production function makes multiplier be even larger than the one. In this paper, based on the approach of Jones (2007,2010) We computed multipliers by intermediate goods. For this purpose, we used Input – Output table of Statistical Center of Iran (base year: 2001). Finding show that 10.6% of total products used in inter- sector transaction and 4.28% used in intera-sector transaction. Therefore, the domestic multiplier is 1.383 and import multiplier is 2.117 and total multiplier is 2.929.These results indicate increase in the multiplier. The industrial sector and mining sector produce the most and the lowest share of domestic intermediate goods, respectively. The highest and lowest shares of imported intermediate goods between economic sectors are in industrial sector and water sector, respectively

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This study investigates the effects of terms of trade shocks and international reserves on the real effective exchange rate. For this purpose is used panel data technique and data related to 20 countries for 1980- 2008 period. Estimation results show that international reserves have buffer effect in terms of trade shocks and cause terms of trade shocks have less effect on real exchange rate. Of course this result confirms in developing countries, but don’t confirm in developed countries. In addition according to results, reserve effect in reduction terms of trade shocks effect in oil exporting countries is more than other countries. Also, according to estimations in this study, increase in financial development reduces buffer role of international reserves.

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A Dynamic Stochastic General Equilibrium (DSGE) Model is developed to study monetary business cycles impacts of volatilities of oil revenue and money supply on macroeconomic variables in Iran. The results show that 0.15 percent deviation from the trend of steady state inflation is explained by changes in oil revenue when it is accompanied by change in money aggregates. However, if such changes in oil revenues are not financed by the central bank, inflation deviates only by 0.1 percent. The results reemphasize the fact that money is neutral in a non-sticky price framework and only affect output and employment by 0.05 and -0.01 percent respectively.

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The aim of this paper is to consider the effects of monetary policy on production and prices through asset price channel (the housing price index) in Iran during 1368Q1 to 1387Q4. By Vector Error Correction (VEC) Model, the effect of monetary policy has been considered through this channel. In general, the results show that the debt of banks to the central bank as instruments of monetary policy through the housing price index, at least in the short run could increase the production level and decreases prices. Thus central bank with given facilities to banks can directly and through the housing price index strengthen production level and control prices in the short run. Also we found that shock of the required reserve ratio in general, directly affects production levels and don’t have any effect on production level and prices through the housing price index. Therefore, in using of these tool as instruments of monetary policy, the housing price index channel in monetary transmission policy, has a little effect and only on the production.

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The unequal allocation of economic resources, or other resources of wealth, regarding to the efficiency among the factors of production, is considered as one of the most important condition of optimal resource allocation in the market system. In other words, the market mechanism in the process of allocating resources among the factors of production rewards to the resources with higher returns. So, the article’s main question is whether the unequal distribution of votes similar to the unequal distribution of money, can be applied in the process of the optimal allocation of citizens' benefits in the democracy system? The answer of this question has been given by the monetary model which is similar to the democracy, using the concept of Anthony Downs’s (1957) rational voter hypothesis, the idea of Paul Samuelson's (1958) monetary economic model, the microeconomic theory of consumption and just one of the major components of the market –the unequal distribution of money–. Using the designed model, we can survey several statuses, Such as: vote exchange possibility (similar to the barter economy) and weighting of votes. The article’s results show that the social contract possibility for exchange and the ability to save money causes to change of the shape and nature of the money from public goods to private goods and the interest rate creation. In this situation, one of the important findings of Samuelson model of monetary is appeared in the space of voting theory. One of the contributions of the monetary model of Samuelson is that one of the origins of the monetary interest rate is population growth. The other results show that the weighting of buyers in the monetary model design under conditions can be led to more efficient choices and social welfare increase ultimately. KEYWORDS: Democracy, Market, Political Market, Money, the Weighting of Votes, Downs’s Rational Voter Hypothesis, Samuelson's Monetary Economic Model.

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Increase in environmental pollutions of fossil fuels calls for policies stimulating clean technology deployment especially in the transportation sector. To evaluate the efficacy of these policies we should explore the preferences of consumers regarding different technologies. In this paper we use a discrete choice approach used in “Canadian Integrated Model system” (SIMS) to identify the behavioral components. This model has a hybrid top-down bottom-up structure. For this purpose we estimate a multi-nominal logit model (MNL) for different automobile technologies and different transportation modes based on preferences revealed by a sample of 250 Tehran citizens. Then, we evaluate the effects of economic, technological and environmental policies on market share of different automobile technologies and air pollution in Tehran. These policies include gasoline price increase, pollution tax, limitations on single passenger cars and limitations on use of gasoline driven cars. According to this analysis, technology based policies can effectively correct the market shares towards clean traffic technologies