Energy Economics
Heshmatullah Asgari; Ali Moridian
Abstract
Iran’s economy has always experienced a steady expansion in the budget deficit, which has limited its ability to achieve comprehensive economic growth, as well as enduring foreign sector instability (trade balance deficit). These two deficits, namely the budget deficit and the trade deficit, must ...
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Iran’s economy has always experienced a steady expansion in the budget deficit, which has limited its ability to achieve comprehensive economic growth, as well as enduring foreign sector instability (trade balance deficit). These two deficits, namely the budget deficit and the trade deficit, must be properly managed in order to promote economic stability and inclusive growth that is both sustainable and long-lasting. Using the rolling window (bootstrap) method, the dynamic causation relationship between Iran’s budget deficit and trade deficit from 1965 to 2018 has been examined in this paper. Considering the structural gaps, the beginning and end of each period of causality are studied. The results of the paper show that during the years 1981-1987, the budget deficit had a positive impact on the trade deficit, which is consistent with the findings of the Mundell-Fleming model. However, during the periods 1975-1977, 1998-1999, and 2005-2013, the budget deficit had a negative impact on the trade deficit due to the abandonment of the trade deficit, which was caused by the absence of organized or less organized financial markets in the country to finance the government budget. In addition, the data indicate that the trade deficit had a positive and substantial effect on the government’s budget deficit during the period 1991-1992, but a negative and significant effect during the periods 1975-1976, 1981-1985, 1989-1970, 2005-2006, and 2009-2011. This indicates that the Iranian government cannot utilize fiscal policy to correct the imbalance in its external sector.
Monetary economics
Ashkan Makipour; Ahmad Salahmanesh; Ebrahim Anvari; Leyla Reshnavadi
Abstract
In recent years, with the expansion of financial institutions such as investment funds, non-bank financial and credit institutions, and financing funds, a sector has been formed in Iran's economy that performs its duties in parallel with the standard banking sector, which is known as shadow banking. ...
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In recent years, with the expansion of financial institutions such as investment funds, non-bank financial and credit institutions, and financing funds, a sector has been formed in Iran's economy that performs its duties in parallel with the standard banking sector, which is known as shadow banking. The formation of such a structure in the economy can be considered a part of the monetary transfer mechanism and affect macroeconomic variables. This study shows that shadow banking is growing rapidly in Iran and due to lack of activity within the framework of Central Bank regulations, it can reduce the effectiveness of monetary policies. In this study, in order to model the shadow banking sector, a Dynamic Stochastic General Equilibrium (DSGE) model has been used considering different sectors of the economy during the period of 2010-2019. The results of the simulation show that the effect of the shadow banking sector on macroeconomic variables is similar to the effect of the standard banking sector, which indicates its impact on the Iranian economy. Also, the simulation of shocks related to interest rates shows that interest rate developments in the shadow banking sector have the same function as the conventional monetary transfer mechanism in the standard banking sector. Therefore, developments in this sector can significantly affect the future direction of economic variables
