Research Paper
Energy Economics
Heshmatullah Asgari; Ali Moridian
Abstract
Iran's economy has consistently experienced a rise in the budget deficit (BD), which has hindered the country's capacity to see overall economic growth. However, it also constantly deals with uncertainty in the international market. Careful management of the link between these two forms of deficits is ...
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Iran's economy has consistently experienced a rise in the budget deficit (BD), which has hindered the country's capacity to see overall economic growth. However, it also constantly deals with uncertainty in the international market. Careful management of the link between these two forms of deficits is necessary to attain stability and sustainable economic growth. This research has investigated the Dynamic causal relationship between double Current Account Deficits (CAD) and Iran's budget deficit (BD) from 1965 to 2018 using the rolling window (bootstrap) method. Every era of causality is examined, taking into account the structural gaps. The paper's findings support the Mundell-Fleming model by demonstrating that, between 1981 and 1987, the budget deficit (BD) positively impacted the current account deficit. However, between 1975 and 1977, 1998 and 1999, and 2005 and 2013, the country's lack of organized or poorly organized financial markets resulted in the abandonment of the current account deficit, which had a detrimental effect on the country's budget deficit (BD). Furthermore, the findings indicate that the government's budget deficit (BD) was positively and significantly impacted by the Current Account Deficit (CAD) from 1991 to 1992, but negatively and significantly impacted from 1975 to 1976, 1981 to 1985, 1989 to 1970, 2005 to 2006, and 2009 to 2011. Overall, the findings suggest that there is dynamic causation between the twin budget-current account deficits, albeit in distinct directions. This suggests that the Iranian government is unable to address the imbalance in its external sector through budget policy.
Research Paper
Econometrics
Neda Esmaeeli; Maryam Ihami
Abstract
This paper aims to assess the existence of information asymmetry on the Iranian stock market and its impact on expected portfolio returns by applying Volume-Synchronized Probability of Informed Trading (VPIN) as a measurement tool. To this end, we used the actual data of 40 companies on the Tehran Stock ...
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This paper aims to assess the existence of information asymmetry on the Iranian stock market and its impact on expected portfolio returns by applying Volume-Synchronized Probability of Informed Trading (VPIN) as a measurement tool. To this end, we used the actual data of 40 companies on the Tehran Stock Exchange (TSE) within the period from March 22, 2018 to March 19, 2020. The outcomes highlight the presence of moderate toxicity levels in the orders of these stocks. Since asymmetric information leads to a risk to investors, they may ask for a premium to trade riskier assets based on the information level, which means that market makers may incorporate the information risk into the pricing of assets. To check this, we investigated the effect of asymmetric information risk on the stock returns on the TSE by adding a factor about the level of order toxicity to the 3, 4, and 5-factor asset pricing models. According to our findings, we affirm that the Iranian stock market priced the asymmetric information risk during the time interval from March 22, 2018, to March 19, 2020. Therefore, it is essential to take into account the information risk factor besides a combination of factors such as market, size, profitability, and investment to obtain the most efficient explanation for the returns of portfolios.
Research Paper
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
Research Paper
Other
Mostafa Shamsoddini; Hosein Nourani
Abstract
Price is known to be a very important indicator for evaluating the performance of firms in the stock market. This study aims to investigate the role of uncertainty and asymmetric information as the main variables influencing the stock price fluctuations on the intrinsic value and market price relationship ...
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Price is known to be a very important indicator for evaluating the performance of firms in the stock market. This study aims to investigate the role of uncertainty and asymmetric information as the main variables influencing the stock price fluctuations on the intrinsic value and market price relationship of firms active in the Tehran Stock Exchange during 2013-2022.The present study attempts to investigate relationship of stock price and mentioned variables in firms active in the Tehran Stock Exchange by modelling the relationship between the stock price and mentioned variables. The results indicate that asymmetric information has a positive and significant effect on the relationship between stock intrinsic price and market price in firms active in Tehran Stock Exchange. Furthermore, the variables relevant to firm performance and economic significantly impact the firm's stock prices. Earnings per share, expected return on risk and economic growth rate have a positive effect and financial leverage, inflation and exchange rate have a negative effect on the stock prices. Overall, the study underscores that uncertainty, asymmetric information, and both firm-specific and economic factors play a pivotal role in explaining fluctuations in stock prices, providing a valuable framework for understanding market behavior in the context of an emerging economy. From a practical standpoint, these findings emphasis the necessity for policymakers and market regulators to enhance transparency and information quality, thereby reducing asymmetric information and fostering investor confidence.
Research Paper
Monetary economics
Zohreh Esksndaripour; Marziyeh Esfandiari; Nazar Dahmardeh; Mohammad Hasan Fotros
Abstract
The role and importance of the banking system as the primary source of financing for businesses is necessary to investigate the factors affecting the profitability of this sector. Therefore, this research uses a computable general equilibrium model (RDCGE), the effect of exchange rate shock, crude oil ...
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The role and importance of the banking system as the primary source of financing for businesses is necessary to investigate the factors affecting the profitability of this sector. Therefore, this research uses a computable general equilibrium model (RDCGE), the effect of exchange rate shock, crude oil price, stock price index, and government budget on Iran's banking system profitability. For this purpose, the social accounting matrix (SAM) of 2011 and the Input-Output table of 2016 were used to analyze the twelve design scenarios and the profitability of the banking system in response to shocks 2, 5, and 10 percent in the exchange rate, crude oil price, stock price index, and government budget are evaluated. The findings reveal that the exchange rate and crude oil prices negatively affect banking system profitability, while the total stock price index and government budget have positive effects. The funding comparison shows that in different scenarios, the shocks of the exchange rate, oil price, stock market, and government budget, respectively have the most effect on bank profitability. thus , appropriate use of the national development fund and government support for the stock market are effective for reducing exchange rate shock and crude oil prices and controlling the consequences of these shocks .
Research Paper
, Behavioral Economics
Hamid Reza Izadi
Abstract
The utility function and consumption behavior within a society wield profound influence over both household conduct and broader macroeconomic dynamics, thereby exerting a pivotal role in fostering economic growth and prosperity. Consequently, the examination and analysis of household consumption behavior ...
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The utility function and consumption behavior within a society wield profound influence over both household conduct and broader macroeconomic dynamics, thereby exerting a pivotal role in fostering economic growth and prosperity. Consequently, the examination and analysis of household consumption behavior stand as a cornerstone in economic inquiry and policy formulation. This study employs a Dynamic Stochastic General Equilibrium (DSGE) model to emulate, scrutinize, and elucidate the intricacies of household macroeconomic variables, particularly delving into the repercussions of economic perturbations while considering shifts in household budget constraints. Utilizing statistical data spanning the period from 1977 to 2020, this research introduces three distinct models to underscore the gravity of the subject matter. The empirical findings from our investigation reveal an intriguing outcome: when subjected to alterations in the utility function governing consumption behavior, all three models exhibited remarkably similar responses to the ensuing shock. Notably, the second model demonstrated the least volatility in consumption fluctuations, concurrently displaying the highest degree of serial correlation with the consumption variable. Conversely, the third model displayed the most pronounced interplay between production and consumption variables, as evidenced by our comparative analysis of consumption variable changes across the trio of models proffered herein. This study delves into the intricate nexus of utility functions and household consumption behavior, offering invaluable insights into the macroeconomic underpinnings that shape our societies.
Research Paper
Econometrics
Azam Ahmadyan
Abstract
This article explores the effects of inflation targeting and money growth rate targeting on the balance sheets of Iranian banks during the COVID-19 pandemic. To achieve this, the study focuses on three key objectives using annual macroeconomic and banking sector data from a developing oil-exporting country, ...
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This article explores the effects of inflation targeting and money growth rate targeting on the balance sheets of Iranian banks during the COVID-19 pandemic. To achieve this, the study focuses on three key objectives using annual macroeconomic and banking sector data from a developing oil-exporting country, employing the Bayesian method and a DSGE model. First, the macroeconomic and balance sheet impacts of the COVID-19 pandemic are examined without the use of inflation targeting or money growth rate targeting policies. Second, the effects of COVID-19 are analyzed in conjunction with inflation targeting, and third, the effects of COVID-19 are studied alongside money growth rate targeting. The primary shocks examined in this paper are the COVID-19 shock, the inflation targeting shock, and the money growth rate targeting shock. To assess the impact of these shocks on macroeconomic variables and the balance sheets of banks, reaction function analysis has been employed.The key findings reveal that the negative effects of COVID-19 are exacerbated by targeting policies. During the spread of the epidemic, the use of these targeting strategies further decreases production and investment compared to scenarios without such policies. Moreover, inflation targeting, in particular, has a more pronounced effect on reducing production and investment than money growth rate targeting. Based on these findings, it is recommended that the central bank considers implementing interest rate targeting alongside inflation and money growth rate targeting policies in order to better support the balance sheets of banks and mitigate the negative effects on the broader economy.
Research Paper
Monetary economics
Mahboobeh khadem Nematollahy; Teymour Mohammadi; Abbas Shakeri; Ali Asghar Salem
Abstract
This study examines the impacts of demand, supply, exchange rate, and unconventional monetary policy (UMP) shocks on GDP, inflation, exchange rate, and interest rate in Iran. Using sign-restriction, short-run zero-restriction, and long-run zero-restriction inside vector autoregressive frameworks, we ...
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This study examines the impacts of demand, supply, exchange rate, and unconventional monetary policy (UMP) shocks on GDP, inflation, exchange rate, and interest rate in Iran. Using sign-restriction, short-run zero-restriction, and long-run zero-restriction inside vector autoregressive frameworks, we constructed three- and four-variable models incorporating real interest rate, real exchange rate, GDP, and inflation data spanning from 1961-Q1 to 2021-Q1. We executed a bootstrap resampling technique that satisfies the signs on loops. Our findings indicate that an unconventional monetary policy, particularly a negative monetary policy shock, results in an increase in GDP and a reduction in the real exchange rate, so significantly reducing inflation. An unconventional monetary policy may be implemented to stimulate the economy. Consequently, the novel combined approach facilitates the identification of unconventional monetary policy shocks and can be broadly applied to other economic shocks. The primary question of the study is whether UMP shocks in Iran can be estimated and identified through zero and sign restrictions. The study aims to identify UMP shocks by regressing a collection of variables pertinent to the decisions of the Central Bank of Iran (CBI).Introducing UMP in emerging market and developing economies (EMDEs) such as Iran aims to attainin their output and inflation targets
Research Paper
Marzieh Sadat Sajadi; Rahman Khosh Akhlagh; Saeed Samadi; Mohammad Vaez Barzani
Abstract
With the inclusion of Bitcoin in the portfolio of individuals, it is necessary to evaluate this asset from different financial aspects. In this research, first the relationship between the Bitcoin price, S&P500 and Nasdaq Composite is evaluated using VAR model. Since in VAR models individual coefficients ...
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With the inclusion of Bitcoin in the portfolio of individuals, it is necessary to evaluate this asset from different financial aspects. In this research, first the relationship between the Bitcoin price, S&P500 and Nasdaq Composite is evaluated using VAR model. Since in VAR models individual coefficients do not lead to statistical inferences, IRFs are being evaluated. It was found that one standard deviation shock on the value of the Nasdaq Composite has a gradual incremental effect on the price of Bitcoin. Also, one standard deviation shock on the value of S&P 500 has a negative downward effect on the price of Bitcoin while one Bitcoin's standard deviation shock is ineffective on S&P500 and Nasdaq Composite. In addition, considering the Granger causality test, S&P500 and Nasdaq Composite cause bitcoin price changes, but the opposite is not true. Having concluded statistical causality of S&P500 and Nasdaq Composite in the previous steps, the price of Bitcoin based on diagnostics being done is regressed as a dependent variable and influenced by the S&P500 and Nasdaq Composite indexes and also needed dummy variable using the ARDL model. The short-term to long-term estimated adjustment coefficient in ECM model is -0.009 and is significant. The overall explanatory power of the model is 99%. Since the normality test and homoscedasticity test were not supported, considering the ability of Robust estimation method to adjust these conditions, this method was used to regress ARDL model. The explanatory power of the model is between 64% and 99%
Research Paper
Macroeconomics
Sajjad Barkhordari; Reza Amiri
Abstract
This paper investigates the fluctuations effect in government spending on the value of firms in preferred industries in the TSE. We employed the TVP-FAVAR method and analyzed seasonal data from 2011 to 2018. The findings indicate that the nature and intensity of the impact of government expenditure on ...
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This paper investigates the fluctuations effect in government spending on the value of firms in preferred industries in the TSE. We employed the TVP-FAVAR method and analyzed seasonal data from 2011 to 2018. The findings indicate that the nature and intensity of the impact of government expenditure on value of firm vary across different sectors. This suggests that as circumstances change over time, the effects of fluctuations in government expenditure also evolve, and industries respond differently to these behavioral changes. Specifically, the value of firms in the automotive industry consistently showed a negative response throughout the entire period studied. In contrast, the food and beverage industry, as well as the pharmaceutical materials and products sector, exhibited a positive reaction to changes in government behavior. Furthermore, the impact of government spending on the chemical, plaster, cement, lime, base metals, and products industries fluctuated over time, with both positive and negative effects observed in the short run and long run. We recommend that the government take into account the status and performance of firms when formulating policies.
Research Paper
Monetary economics
Reza Taheri Haftasiabi; Parviz Piri; Ameneh Naderi; Nashmil Esmaily
Abstract
This study examines the role of bank credit and macroeconomic variables in predicting financial crises in Iran. Given the importance of predicting and managing financial crises in the Iranian economy, this study aims to identify the key factors and build accurate models to predict these crises.Panel ...
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This study examines the role of bank credit and macroeconomic variables in predicting financial crises in Iran. Given the importance of predicting and managing financial crises in the Iranian economy, this study aims to identify the key factors and build accurate models to predict these crises.Panel data for the period 2006 to 2022 was used for this study. Advanced machine learning techniques and neural networks were used to analyse the data and create predictive models. These approaches make it possible to examine complex relationships between variables and make more accurate predictions.The results of this study show that the bank debt service ratio, the slope of the yield curve and the investments made are the most important factors in predicting financial crises in Iran. Bank loans also play a minor role in these predictions. The models used, especially neural networks and random forests, have shown high accuracy in predicting financial crises. This study has important implications for economic and financial policies in Iran. The results emphasise the need to review debt management policies, improve the investment environment, and adjust monetary and credit policies more precisely. These findings can help policy makers and economic managers to make more informed decisions and prevent future financial crises.
Research Paper
Monetary economics
Hosein Samsami; Hesam Hasanpour; Mohammad Ali Nowjavan
Abstract
As a result of the accumulation of fictitious assets in the bank balance sheet, the banking system has been faced with insolvency in recent years which has had grave impacts on both the money and real sectors. This study aims to investigate the causes of the increase in liquidity through the creation ...
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As a result of the accumulation of fictitious assets in the bank balance sheet, the banking system has been faced with insolvency in recent years which has had grave impacts on both the money and real sectors. This study aims to investigate the causes of the increase in liquidity through the creation of fictitious assets and to examine the effects of these assets on macroeconomic variables, which has not been investigated in other studies. Using a pattern of structural macro-econometric and the ARDL method, this paper investigates the impact of removing fictitious assets from the bank balance sheet on the money supply and other macroeconomic variables in Iran from the first season of 2006 to the fourth season of 2022. The designed macro-econometric pattern includes 8 behavioral equations and 7 identity equations. Two scenarios have been developed in this paper: The first scenario surveys the impact of effective money (the aggregate money minus fictitious assets) on macroeconomic variables. The second scenario examines the impact of aggregate money on macroeconomic variables. The findings indicate that the existence of fictitious assets in the bank balance sheet causes an increase in the money supply and reduces the quality of money. However, fictitious assets have no impact on the real sector and the effective money’s influence on macroeconomic variables such as production, investment, employment, and consumption is more than the aggregate money’s impact on these variables. Also, the results show that ineffective money merely increases the price levels.
