raha sadat ramezanian; Mohammadtaher Ahmadishadmehri; mohamad javad razmi; Mohammad Hossein Mahdavi Adeli
Abstract
INTRODUCTION
Pension funds, as intergenerational financial institutions, should be able to finance individuals in old age and disability by accumulating the micro-savings of the insured and investing in them. Therefore, one of the concerns of the mentioned funds is how to invest the micro-savings ...
Read More
INTRODUCTION
Pension funds, as intergenerational financial institutions, should be able to finance individuals in old age and disability by accumulating the micro-savings of the insured and investing in them. Therefore, one of the concerns of the mentioned funds is how to invest the micro-savings of the insured in different areas. In Iran, pension funds under the Ministry of Cooperatives, Labor and Social Welfare play a significant role in the capital market and more than 53% of the daily value of the assets of these funds belong to the listed companies (47% of non-listed capital), which possess more than 13% of the total market daily value (stock exchange and over-the-counter).
THEORETICAL FRAMEWORK
Minimizing portfolio risk, investors can obtain an efficient portfolio for a certain return. Continuation of this process leads to the development of efficient portfolios, called the mean-variance efficiency frontier. The following data are required to apply the Markowitz model:
Expected return on stock i, denoted by E(Ri).
The standard deviation of the expected return on ith stock, considered as an indicator for the risk of every stock, denoted by Si.
Covariance, as an indicator of coordination between the return rates of different stocks, denoted by δij.
METHODOLOGY
To determine the optimal portfolio, first the returns of the days in which the transaction did not take place were interpolated by MATLAB and interpolation method and a matrix of 1354 × 9 was obtained. Then, at a 15 percent confidence level, the normality of the time series of returns of each group of industries was investigated by Jarque-Bera (JB) test. Next, the Markowitz model was solved and the weights were determined for each stock in the optimal portfolio of the Social Security Pension Fund. Research data were collected daily for the period 2015:03:25 – 2020:09:21 from the website of the Financial Information Processing Center of Iran and the Social Security Investment Company.
RESULTS & DISCUSSION
Findings show that for investment in the Social Security Pension Fund, among real portfolio, the Markowitz model portfolio and the VaR model portfolio, the Markowitz model optimal portfolio is better than the VaR portfolio and the real portfolio as it has the highest return-to-risk ratio. In order to optimize the investment portfolio, this fund should increase its investment share in the groups of pharmaceutical materials and products by 7%, investments by 2% and the base metals by 1%. It should also reduce its investment share in the groups of multidisciplinary companies by 3%, chemical products by 3%, cement, gypsum and lime by 2% and petroleum products by 2%.
CONCLUSIONS & SUGGESTIONS
Since the results of the study show that the proposed portfolio of this study based on the Markowitz model is optimal for investing in the stock industries of the Social Security Fund, it is suggested to the authorities and planners of this fund to change their existing investment portfolio to the proposed portfolio and especially increase their share of investment in the group of pharmaceutical materials and products as the Social Security Organization (TPICO Holding) has an advantage in this industry on a national scale and its development is consistent with the organization's strategies. It is also suggested that the Social Security Fund reduce the dispersion of investment in markets-industries and over-investment in company management as it has always posed a great risk to pension funds around the world.
Hossein Takroosta; Yaghoub Maharati; Mostafa Kazemi; Mohammad Hossein Mahdavi Adeli
Abstract
Introduction Faced with fierce competition, market pressure, and the need to adapt to environmental changes, organizations cannot limit domains of their activities to specific sectors, and they are needed to make transformative decisions, including setting up new businesses, acquisition of other ...
Read More
Introduction Faced with fierce competition, market pressure, and the need to adapt to environmental changes, organizations cannot limit domains of their activities to specific sectors, and they are needed to make transformative decisions, including setting up new businesses, acquisition of other companies, and diversifying their activities. Increasing changes and changes in the scientific, economic and social spheres are one of the main features of the present era. Entrepreneurship and innovation is a must and need for many companies today in a competitive environment that seeks to survive and be effective. Therefore, many companies are desperately looking for innovative and entrepreneurial approaches to improve their results and performance in the areas of products, services and processes. Corporate entrepreneurial approach is the development of new ideas, methods, processes and opportunities within pre-established organizations (Hodge,2008). Considering the components of corporate entrepreneurship in running a business increases the competitiveness of companies and gains market success and ultimately enhances the financial performance of companies. The purpose of this study is to identify the effective factors on corporate entrepreneurship in the international literature and finally to use the knowledge of indigenous components of corporate entrepreneurship and extract them after extraction. Components, examines the impact of native components on the financial performance of selected companies. Theoretical Framework One of the effective measures can be taken by companies to stabilize markets and create competitive edge is to employ corporate entrepreneurship tools. Using this approach, companies are creating and utilizing entrepreneurial traits in order to transform. Studies show that utilizing such methods improves corporate performance and makes value for shareholders and other stakeholders. Since the 1980s, as emerging economies have made remarkable advances in industrial production and export, manufacturers and industrialists have faced emerging and powerful competitors in the marketplace. This confrontation has led many large corporations to risk losing their traditional markets and customers. Knowledge products and competitive pricing on the one hand, and the rapid pace of technology change on the other hand, increased the pressure for businesses to compete. Corporate Entrepreneurship Entrepreneurship is a mechanism for economists that provides optimal allocation of resources using the opportunities at stake (Caliendo & Kritikos, 2012). Calisto & Sarkar (2017) have considered corporate entrepreneurship components including innovation and risk-taking to achieve different degrees of entrepreneurial behavior and thus different levels of organizational innovation and performance. In analyzing the impact of corporate entrepreneurship on the financial performance of manufacturing firms, Octan and Bulut (2008) have considered the impact of corporate entrepreneurship components including innovation, risk-taking, pioneering and aggressive competition on the financial performance. Zahra (1993) studied the relationship between firm environment and corporate entrepreneurship including: innovation, organizational restructuring, and new business creation with financial performance. The study also showed that corporate entrepreneurship has a positive and significant effect on financial performance. Miller (1983, 2011) examines the important determinants of corporate entrepreneurship. According to the results, the impact of different factors on corporate entrepreneurship depends on the type of firm. Financial performance A wide range of indicators are used to evaluate corporate financial performance. In for-profit businesses, maximizing equity dividends is the primary goal of companies. To evaluate the success of this objective, the asset return index is used as the primary indicator. Methodology To achieve this goal, reviewing current literature in corporate entrepreneurship, we, first, try to identify the components of corporate entrepreneurship. Then, the identified components were reviewed by elites to screen exotic components out. In the third step, juxtaposing performance of the selected companies, we compare the entrepreneurial rank and financial performance of the companies. Results and Discussion Our findings highlight that, in line with international research papers, there is a significant relationship between the entrepreneurship rank of companies and their financial performance. Creativity and innovation In order for these features to flourish, managers must devote considerable resources to this area. Another notable case in this section is the importance of selecting managers based on their creativity and innovation characteristics. Risk-taking Companies and managers must carefully study the characteristics of their risk-taking in recruiting individuals, and look at their family, environmental, social, and professional backgrounds using human resources. Competition Companies must adopt groundbreaking behaviors in order to improve their competitive position compared to other companies, and this approach is due to formulating a strategic competitive plan and targeting all corporate actions to achieve this goal. Conclusion and suggestions According to the results, some suggestions are put forward to make more use of the research results in the business environment of the companies under study. The need for self-renewal and adaptation requires that the capabilities and resources of the company change from time to time, so the strategic plan of the corporation should include specific objectives in order to adapt to the environment. In the case of strategic restructuring, corporate executives should be committed to providing favorable conditions to create strategic restructuring and to encourage employees to take this path. Given the competitive economic environment, proper planning to achieve competitive advantage and seek new opportunities is one of the most important tasks for corporate executives. Strategic variables Having a proper roadmap is definitely one of the key factors in the success of companies. In the face of ever-increasing economic competition, a comprehensive and dynamic strategic plan is crucial, taking into account market and competitor aspects and the type of product and service provided by companies. Therefore, corporate boards should formulate, review, and approve strategic plans that are appropriate to corporate goals and seek to control CEOs to fully implement these plans. Studies show that organizational structure is the most appropriate tool for creating entrepreneurship in organizations. An overview of the evolution of organizational structure shows that traditional organizational structures are not capable of nurturing creative and innovative individuals. Given the very high importance of corporate culture in corporate entrepreneurship implementation, boards of directors and CEOs need to spend time and money on reforming corporate culture patterns and gradually reforming and implementing entrepreneurial culture in the company.
Mitra Seyedzadeh; Mohamad Hosein Mahdavi adeli; mehdi behname; Taghi Ebrahimi salari
Abstract
Introduction
Achieving economic growth along with improving the distribution of income is always one of the main goals of economic development. In this regard, policy makers are the tools and policies that enhance the growth and distribution of income in a coherent way. On the other hand, it is expected ...
Read More
Introduction
Achieving economic growth along with improving the distribution of income is always one of the main goals of economic development. In this regard, policy makers are the tools and policies that enhance the growth and distribution of income in a coherent way. On the other hand, it is expected that the insurance industry will be able to provide simultaneous access to economic growth and distribution of income, taking into account the function of risk distribution and its compensation, as well as its role in financial development. To test this hypothesis, here has used of the AutoRegressive Distributed Lag (ARDL) approach during the period 1975-2016.
The results showed that the development of the insurance industry could provide simultaneous access to economic growth and income distribution in the short run. But in the long run, it will only lead to economic growth. However, in the long run, it could be reliant on human and physical capital for simultaneous access to economic growth and the distribution of income. Also, based on the error correction model, 88.2% and 68.1% of the non-equilibrium related to the non-oil per capita gross domestic product and Gini coefficient are adjusted in each period, respectively.
Theoretical framework
In The second half of the 20th century onwards, especially since the 1970s, following widening the income gap between the poor and the rich as well as the development in public awareness, it has been emphasized on increasing the quality of life (Mehregan & Salarian, 2008:13). In general, classical and neoclassical economists believe that an uneven distribution of income can have a positive effect on the growth process, while others such as Mirdal and Sen believe that economic growth entails an improvement in income distribution and in fact considers the reduction of inequality necessary (Khodadad Kashi & Heidari, 2008: 153). However, if economic growth and improvement in income distribution are considered two essential components of economic development, there are three strategies for development (Sharifzadegan, 2007: 23-24):
A) Growth then Redistribution (GTR): Accordingly, with economic growth and the creation of vast economic capacities and enlarging the size of the economy, the conditions for employment is automatically provided for all social and income groups, thereby achieving a balanced income distribution.
B) Redilribution then Growth (RTG): In this strategy, comprehensive resources are mainly spent on proper distribution of income, and investment on economic growth and attention to it comes at a lower level, and practically undermines the social capacity of the community. Many experiences and studies show that in the long run, this policy will not achieve a balanced distribution of income or economic growth.
C) Growth with Redistribution (GWR): This strategy emphasizes that income redistribution cannot work without relying on a booming economy. In this strategy, executive policies should be able to work both for economic growth and for income distribution. The development of the insurance industry with the aim of fostering economic growth and improving income distribution can also be considered as one of the policies of this strategy.
Methodology
In this section, the following two econometric models are considered to examine the effects of the development of the insurance industry on economic growth and income distribution:
(1)
(2)
In the empirical studies, the variable level of income is present in the income distribution model, but the present study assumes that the level of income of individuals affected by physical wealth (physical capital or CAPL) and human wealth and capital (skill, expertise, and education level or HCAP). Accordingly, the LHCAP and LCAPL variables are used in the income distribution model instead of the natural logarithm of the income level. The research models for the period 1975-2016 will be estimated using the ARDL method.
Result and discussion
Because dynamic short-run interactions between variables are not considered in OLS method, the use of this method in estimating the long-run relationship does not necessarily yield unbiased estimation. Therefore, it seems reasonable that in such cases those models be considered that have short-term dynamics and thus make the model coefficients more accurately estimated. The ARDL method is a dynamic model that allows to estimate the long-run coefficients of the model with appropriate accuracy in addition to the cointegration test between variables (Nofersti, 2008). The main advantage of using the ARDL method is that regardless of whether the research variables have unit root in levels or some become stationary by one time differentiation, a long-run cointegration relationship between the variables can be obtained.
Conclusion
Achieving high economic growth coupled with improved income distribution has always been a major concern for policymakers in developing countries. In this regard, based on their historical experiences and those of other countries as well as the theoretical and empirical studies, countries prefer the strategy of Growth with Redistribution over GTR strategy or vice versa. On the other hand, insurance is expected to provide simultaneous access to economic growth and income distribution, given its functional role in risk distribution and compensation as well as its role in financial development. In the present study, this hypothesis was tested for the Iranian economy over the period 1975-2016 using the ARDL method.
The results of estimating income distribution model as ARDL (1, 1, 2, 3, 3, 1) showed that insurance penetration factor variables had a negative effect on Gini coefficient immediately and with a one-year lag. Oil revenues also have an impact on the Gini coefficient similar to that of the insurance industry, with its effect initially positive and negative with a one-year lag. But human capital with a two- and three-year lag and physical capital with a three-year lag have a negative effect on the Gini coefficient. Also, the results of estimation of economic growth model as ARDL (2,1,2,2,0) showed that development of insurance industry has positive and immediate effect on economic growth. The variables of human and physical capital have a positive significant lagged and non-lagged effect, and business openness variables have a positive and significant effect on economic growth after one-year lag.
Abdollah Razavi; MohammadHosein Mahdavi Adeli
Abstract
Introduction
The Extreme volatility of oil prices was led the numerous disruptions in the world market of oil and therefore, in the world economy in the late twentieth century. Many stocks that oil speculators imported to the market for profitability affected the major oil producers more than ...
Read More
Introduction
The Extreme volatility of oil prices was led the numerous disruptions in the world market of oil and therefore, in the world economy in the late twentieth century. Many stocks that oil speculators imported to the market for profitability affected the major oil producers more than any other group because the marker crude oil pricing was always in change. Economic indicators are one of the most important factors in determining the price of goods in different markets and also can be considered as effective factors in oil future markets. For example, interest rates and risk premium are variables that and change future oil price from expectation channel (Fama & French, 2011). In addition, oil spot price and oil commercial reserves are affected its future price because the changing oil spot price is affected expectations and will be reflected in oil future price. The marker crude oil futures price is very important for traders, consumers and producers. Oil stock is significant and effect on the oil future price. This paper seeks to investigate the impact of economic variable on the behavior of marker crude oil futures price. Due to the high share of oil revenues in GDP in Iran, oil price volatility is led to disruptive development plans, annual plans and structural bottleneck in the long term.
Research Background
The cost of carry model refers to costs associated with the carrying value of an investment. These costs can include financial costs, such as the interest costs on bonds, interest rate, interest on loans used to make an investment, and any storage costs involved in holding a physical asset (Caporale ,(2010)). Cost of carry may also include opportunity costs associated with taking one position over another. In the derivatives markets, cost of carry is an important factor for consideration when generating values associated with an asset’s future price. Cost of carry can be a factor in several areas of the financial market. As such, cost of carry will vary depending on the costs associated with holding a particular position. Cost of carry can be somewhat ambiguous across markets which can have an effect on trading demand and may also create arbitrage opportunities. In the derivatives market for futures and forwards, cost of carry is a component of the calculation for the future price as notated below. The cost of carry associated with a physical commodity generally involves expenses tied to all of the storage costs an investor foregoes over a period of time including things like cost of physical inventory storage, insurance, and any potential losses from obsolescence. Each individual investor may also have their own carrying costs that influence their willingness to buy in the futures markets at different price levels. The futures market price calculation also takes into consideration convenience yield, which is a value benefit of actually holding the commodity.
Zyren (1997) believe that an important determinant of crude oil price is the commercial oil reserves demand. The commercial oil reserves demand is related to the differential of spot and future price. This difference reflects speculative returns for commercial crude oil reserves demand. When future price rises, commercial reserves will increase due low level storage costs in financial markets. Therefore, the difference between crude oil future and spot price determines the storage cost commercial reserves.
Research Methodology
For the first time, Engle in 1982 demonstrated that there are some conditions which some models can be studied simultaneously. These models are including the conditional average and conditional variance. The pre-mentioned models are known as ARCH models (returned conditional heteroscedasticity) that their basis is hidden in the elimination of heteroscedasticity in the studied patterns. There are many advantages of using these models. However, one of the main advantage of ARCH models is explaining the process of conditional variance due to its past information. In general, ARCH process q order is provided by the following equations.
In the model of generalized ARCH which is commonly called GARCH, both of the associated components and moving averages components appear in variance equation (Enders, 2004). The more savings in the model, the lower number of coefficients limits. One of the obvious advantages beyond the pre-mentioned advantages of GARCH model is that in some cases instead of a high order ARCH model, GARCH model is replaced that the principle of savings is more considered. Therefore, identification, and its evaluation is much easier than the previous models. Meanwhile, the simple model GARCH provides a concise description of the information (Bolerself 1986, MacCurdy and Morgan, 1988). One of the multivariate GARCH models is BEKK model which is used in investigating the overflow impact which is used in the research methodology of this paper.
Results
This study examines the factors of formation marker crude oil futures price and analyzes the effect of variables such as interest rate, risk premium, market structure and oil commercial reserves on marker crude oil futures price. Rising interest rate have increased the cost of commercial storage then oil demand reduced in the physical oil market and consequently decreased future oil price in the market. In addition, due to the very close relationship between the physical and future oil market (through the channel of expectation formation) the future and spot price are co movement. Also, strengthening risk premium leads to increase oil commercial reserves, thereby increasing demand in the physical market and decreasing demand in the futures market. In addition, as cantango increases, the commercial reserves demand will increase because the cost of buying oil at the present time lower than forward time.
narges salehnia; Ahmad Seifi; Mohammad Ali Falahi; Mohammad hossein Mahdavi Adeli
Abstract
Introduction
Economic growth has been tied to the growth of fuels consumption like natural gas. The inherent features of natural gas market like its dependence on wellhead price, long-distance transportation costs, gas pipeline systems, economies of scale, non-existence of monopoly market for the end ...
Read More
Introduction
Economic growth has been tied to the growth of fuels consumption like natural gas. The inherent features of natural gas market like its dependence on wellhead price, long-distance transportation costs, gas pipeline systems, economies of scale, non-existence of monopoly market for the end user, large proportion of fixed costs compared to variable costs, relatively low income elasticities, etc., have created different market structures which affect the price (Khaleghi, 2010; Whitesitt, 2005; Mansour Kiaei, 2008). Moreover, extensive governmental interventions in gas pricing, have led to the adoption of diversified pricing systems so that there is not any global gas price (Jensen, 2011; Vafee Najjar, 2008).
The gas market has experienced dramatic changes that began with the liberalization process of the market in the 1980s, the result of which was the creation of a spot market (Jafari Samimi et al., 2007; Manzoor & Niakan, 2011; Apergis, Bowden, & Payne, 2015). This market determines the opportunities offered by firms and investors, especially the opportunity cost of stagnant assets by price detecting. Hence, spot prices estimation that uses behavioral characteristics like mean reversion can be useful in future prices evolution (Hull, 2000).
In financial economics literature, it is thought that mean reversion is a sign of inefficient market, and it runs counter to the assumption of random walk. Exley, Mehta, & Smith (2004) state that mean reversion is not necessarily a sign of inefficiency in the market. They believe that it could be due to risk aversion or return distribution over time. Since the world's most mobile gas market, which determines the basic price of the gas exchanges in other countries, including Iran, is located in the U.S. Henry Hub, this hub is being mentioned here.
Methodology
Departures from normal price spreads are possible in the short run under abnormal market conditions, but in the long run, supply will be adjusted and the prices will move to the level dictated by the marginal cost of production. The basic theory of microeconomics states that in the long run, the price of an energy commodity must be related to its long-run marginal cost (Begg & Smith, 2007; Rahimi, 2008). In this paper, we analyze mean reversion, which was first described by Vasicek (1977) and was subsequently widely adapted.
Mean reversion is a normal logarithmic diffusion process, but its variance is not proportional to the incremental time intervals. The variance initially grows and then stabilizes in a certain amount (Geman, 2005; Wittig, 2007). This process has contains two components: the first one indicates drift with rate of mean reversion speed and equilibrium long run mean, and the second component of this process is diffusion term and shows its randomness.
Results and Discussion
This paper aims at mean reversion verification, estimating Ornstein-Uhlenbeck Mean Reverting Model (OUMRM) and forecasting gas daily prices based on Henry Hub data (07/01/1997-20/03/2012). Using different mean-reverting statistics like Unit-Root, autocorrelation coefficients reveal that price returns of natural gas prices do not follow a random walk process. Therefore, there can be a sign of mean reversion. The non-decreasing gradual correlation coefficients of returns indicate that the historical information available in long-term lags can be effective in determining future prices like information in the short-term lags.
The results show the existence of mean reversion using the methods of linear regression and maximum likelihood. The long-run mean price is 4.16 $/mmBtu and it takes the market around 48 weeks to remove daily price shocks. Finally, it is observed that performance evaluation criteria are highly dependent on the number of random simulation paths and the best performances are satisfied with 1000 simulation paths mean.
Conclusion
Energy price changes and volatilities have led to an increase in the uncertainty and potential value of predicted prices. Hence, providing models for accurate prediction of natural gas prices with regard to its characteristics like mean reversion is important because it can be applied to determine a wide range of regulatory decisions both on the supply and demand sides of the market. The results of this study is similar to Geman (2007), Skorodumov (2008), Cheong (2009), and Chikibvou and Chinhamu’s (2013) studies and reveas that the existence of the mean reversion phenomenon varies depending on the length of the study period.
Moreover, because of the mobility and transparency of information in gas markets in recent years, as returning to the recent periods, the mean reversion speed becomes higher. It shows higher adjusting speed of mean reversion and faster removal of price distortion caused by shocks. In addition, the more we approach to the recent years, the more long-run mean price is. This implies that investors and traders are expecting a surge in prices and the price volatility in the prices above long-run mean is higher than the prices below it. Therefore, these achievements in determining the behavior of this commodity can lead to a reduction in risk and a great help in predicting the path of the price of long-term contracts.
Farzaneh Ahmadian Yazdi; Masoud Homayouni Far; Mohammad Hosein Mahdavi Adeli; Mohammad Ali Falahi; Seyyed Mohammad Hoseini
Abstract
Introduction
Financial system is fundamental for economic growth in most of countries. Based on vast studies done on the determinants of economic growth, financial development leads to economic growth in many countries in long time (Rousseau & Wachtel, 2002). It is worth noting that the importance of ...
Read More
Introduction
Financial system is fundamental for economic growth in most of countries. Based on vast studies done on the determinants of economic growth, financial development leads to economic growth in many countries in long time (Rousseau & Wachtel, 2002). It is worth noting that the importance of financial system in economic growth has been notified for many years (e.g., Bagehot, 1873; Hicks, 1969; McKinnon & Shaw, 1973; King & Levin, 1993; Levin, 1997, 2002; Beck, Demirguc-Kunt & Levine 2000; Aizenman, 2015).
Although there is a vast literature about the importance of financial development, most of them have investigated the direct impact of financial development on economic growth. In this case it is important to know that there are four main channels that contribute to the relationship between financial development and overall economic output that are foreign capital, physical capital, human capital, and social capital. Based on World Bank’s analysis (2012), these five kinds of capital form national wealth in all economies. Meanwhile natural capital has the main role in resource-rich countries.
There is an expanding literature that shows the effects on natural resource rents on economic growth in resource-rich countries. Gylfason (2001) introduced four main channels that consist of four kinds of capital mentioned above to show how resource rents affect economic growth.
One of the important issues that have been neglected in this concept is how resource-rich countries can reverse the negative effects or improve the positive effects of resource rents on capital accumulation. There are few studies that argue financial development is an effective solution for that aim.
2) Theoretical Framework
Four kinds of capital that contribute to the relationship between resource rents and economic growth are foreign capital, physical capital, human capital and social capital. In fact natural capital will affect them in all resource-rich countries. Hence, the first step is to investigate the simultaneous effects of natural capital on other kinds of capital.
The conceptual model of this paper is that financial development is an infrastructure that has potential in improving the positive (or reducing negative) impact of natural resources on all kinds of capital accumulation. Therefore, the second step of this study is investigating the role of financial development on the effects of natural resources on accumulation of this kind of capital.
In this paper, we will show that financial development could absorb resource rents in order to allocate resources and invest them in most optimal projects. For more details it would be necessary to say that the debate about the influence of financial development on economic growth has been ongoing for more than a century. Since Schumpeter (1912) believed that financial development affects economic activity and hence economic growth. In fact, financial development has emerged as one of the policy levers central banks and governments use to target economic growth.
In fact, financial development is based on the financial development index which provides a measure for the breadth, depth and efficiency of financial systems. Generally, financial development is the factors, policies and institutions that lead to effective financial intermediation and markets, as well as deep and broad access to capital and financial services. To achieve a coherent view about financial development it would be necessary to know the main financial system functions. These are:
Facilitating the trading, hedging, diversifying and pooling of the risks;
Allocating financial resources;
Monitoring managers and exerting corporate control;
Mobilizing savings;
Facilitating the exchange of goods and services (Levine, 1997).
Governments in developing resource-rich countries in order to achieve the optimal use of resource rents could stimulate financial development through some macroeconomic policies (Huang, 2010). One of the probable results of financial development is to smooth consumption of below-ground wealth across generations. Other consequence of financial development will be seen in isolating government budgets from volatile resource prices, allowing the budgetary process to be conducted with more certainty.
Methodology
This paper provides a model for investigating the simultaneous effects of natural resource rents on four kinds of capital accumulation using SUR model. In second step, for investigating the role of financial development index on the effects of natural resource rents on all kinds of capital, we have utilized Rolling Regression technique. This method is suitable for testing the effects of one variable on two other variables in a model. Also, it is worth noting that the multi-dimension financial development index that consists of 8 main financial indices in banking sector is made by PCA method.
Results and Discussion
Based on the results of SUR estimator, resource rent has positive effect on foreign and social capital but it has negative effect on physical capital. There are various effects from resource rents on human capital accumulation; sometimes, it has positive and sometimes it has negative effect. It shows that natural resource rents have different effect on each kinds of capital accumulation in Iran during 15 rolling regression (fixed) windows that have 30 observations for each variable in one window. As is evident in this paper, the total natural resource rents itself is not a curse for the economy, but it could be a blessing. One of the important reasons for the negative effect of resources on physical capital is more governmental investments in this sector and there are some rent-seeking activities that prevent resources from mobilizing to productive projects.
The results of rolling regression show that the development of financial banking system can improve the effects of resource rents on physical and social capital in Iran. But we do not get the same results for foreign capital and human capital. In foreign capital sector, ignoring the development of external dimension of financial banking system that may be seen as financial liberalization is one of the main reasons for this event.
The reason for undesirable effect of financial development in human capital sector relates to low level of financial innovation in banking sector and high level of risks that banks are faced with. Consequently, many innovative projects from people who have high level of human capital accumulation will not be considered in Iran.
Conclusion and Suggestions
Natural resource management is one of the important issues in resource-rich countries. Based on the results, financial development can mitigate the negative effect or improve the positive effects of these rents on capital accumulation. The results show that financial development would be beneficial for this aim in physical and social capital sector in Iran. But it cannot improve the effects of resource rents on foreign and human capital accumulation.
Based on the results, we could suggest that considering development of financial system is a necessity in resource-rich countries such as Iran. Meanwhile the important issue is focusing on all financial development channels that lead to balanced development in financial system. Also, it is worth noting that policy makers should avoid financial repression because this would prevent it from imposing positive effects on the economy. At the end, we could say that paying attention to all kinds of capital would lead to sustainable economic growth when it is accompanied by stable financial development.
mahdi ghaemiasl; Mahmod Hossin Mahdvi Adeli; shhab matin; sayed mahdi mosavi barrodi
Abstract
Iran has more than a century of history in exploration and production; the first successful exploration well was Masjid Suleiman-1 on May 26, 1908. Since then, based on the latest oil and gas reports, 145 hydrocarbon fields and 297 oil and gas reservoirs have been discovered in Iran, with many fields ...
Read More
Iran has more than a century of history in exploration and production; the first successful exploration well was Masjid Suleiman-1 on May 26, 1908. Since then, based on the latest oil and gas reports, 145 hydrocarbon fields and 297 oil and gas reservoirs have been discovered in Iran, with many fields having multiple pay zones. Proved oil reserves in Iran, according to its government, rank fifth largest in the world at approximately 150 billion barrels as of 2014, although it ranks third if Canadian reserves of unconventional oil are excluded. This is roughly 10% of the world's total proven petroleum reserves.
Oil sector in most of oil exporting countries (such as Iran) is a state-run sector and oil revenues belong to government. Iran is an energy superpower and the Petroleum industry in Iran plays an important part in it. In 2004 Iran produced 5.1 percent of the world’s total crude oil (3.9 million barrels per day), which generated revenues of US$25 billion to US$30 billion and was the country’s primary source of foreign currency. At 2006 levels of production, oil proceeds represented about 18.7 percent of gross domestic product (GDP). However, the importance of the hydrocarbon sector to Iran’s economy has been far greater. The oil and gas industry has been the engine of economic growth, directly affecting public development projects, the government’s annual budget, and most foreign exchange sources. In 2009, the sector accounted for 60 percent of total government revenues and 80 percent of the total annual value of both exports and foreign currency earnings. Oil and gas revenues are affected by the value of crude oil on the international market. It has been estimated that at the Organization of the Petroleum Exporting Countries (OPEC) quota level (December 2004), a one-dollar change in the price of crude oil on the international market would alter Iran’s oil revenues by US$1 billion.
The main hypothesis of this study is that the government's dependence on oil revenues has been caused policy passivity in Iran's economy. Fiscal policy and monetary policy are the two tools used by the state to achieve its macroeconomic objectives. While for many countries the main objective of fiscal policy is to increase the aggregate output of the economy, the main objective of the monetary policies is to control the interest and inflation rates. Traditionally, both the policy instruments were under the control of the national governments. Thus traditional analyses were made with respect to the two policy instruments to obtain the optimum policy mix of the two to achieve macroeconomic goals, lest the two policy tools be aimed at mutually inconsistent targets. In case of an active fiscal policy and a passive monetary policy, when the economy faces an expansionary fiscal shock that raises the price level, money growth passively increases as well because the monetary authority is forced to accommodate these shocks. But in case both the authorities are active, then the expansionary pressures created by the fiscal authority are contained to some extent by the monetary policies.
In other word the central bank's monetary policy and fiscal policy of the government have a heavy reliance on oil revenues and budgeting and monetary changes, instead of being active and effective, have an affective and passive nature and are subject to oil shocks.
In this study in order to investigate this hypothesis, seasonal data of 1369:1 to 1389:4 of oil revenues, government expenditures (as a representative of fiscal policy), monetary base (as a representative of monetary policy), GDP, exchange rate and GDP deflator (as a representative of price index) in a Factor-Augmented Bayesian Vector Autoregressive model have been used. If a small number of estimated factors effectively summarize large amounts of information about the economy, then a natural solution to the degrees-of-freedom problem in VAR analyses is to augment standard VARs with estimated factors. In this paper we consider the estimation and properties of factor-augmented vector autoregressive models (FAVARs).
Results of impulse response function and variance decomposition clearly confirm the passive monetary and fiscal policy in the Iranian economy. In other words, among the variables of model, the most affected variables respectively are the monetary base and government expenditures. According to the authors, there are two basic ways to deal with policy passivity, which are sterilization and stabilization of oil revenues through the correct management of stabilization funds and diversification of exports. Sterilization is, not to bring all the revenues into the country all at once, and to save some of the revenues abroad in special funds and bring them in slowly. In developing countries, this can be politically difficult as there is often pressure to spend the boom revenues immediately to alleviate poverty, but this ignores broader macroeconomic implications. Sterilisation will reduce the spending effect, alleviating some of the effects of inflation. Another benefit of letting the revenues into the country slowly is that it can give a country a stable revenue stream, giving more certainty to revenues from year to year. Also, by saving the boom revenues, a country is saving some of the revenues for future generations. In addition Oil stabilization funds are usually designed to address the problems created by the volatility and unpredictability of oil revenues, the need to save part of the oil revenues for future generations or both.
Mohammah Hossein Mahdavi Adeli; reza Khaje Naeini
Abstract
Energy resources can be classified into three major categories naming fossil fuels,
nuclear energy, and renewable energy (wind, solar, and so on). However, fossil fuels
depletion in future makes use of the two other categories necessary. Compared to
fossil fuels and nuclear energy, the renewable energy ...
Read More
Energy resources can be classified into three major categories naming fossil fuels,
nuclear energy, and renewable energy (wind, solar, and so on). However, fossil fuels
depletion in future makes use of the two other categories necessary. Compared to
fossil fuels and nuclear energy, the renewable energy does not only bring no
pollution and cause no harm to environment, but also consist of infinite resources.
Using COMFAR software and the method of cost-benefit, this article aims to
analyze construction of a 25 MW solar photovoltaic power station. Then, it studies
the impact of incentives in construction of such a plant in different countries.
Results of this study indicate that feed-in tariff incentiveshave the greatest impact on
improving financial indexes of the project. The paid tax of an enterprise isalso
considered in ranking. It finally shows that financial aids have no effect but on
decreasing theinvestor's share of equity.
Mahdavi Aadeli Mohammad Hossein; Ali Kazemi; Shirin Feiz Mohammadi
Abstract
Foreign direct investment (FDI) plays a crucial role in the economic literature,
especially in developing countries. It is also an important factor for policy makers to
analyze the relation between foreign direct investment and other important economic
variables. One of these variables is export which ...
Read More
Foreign direct investment (FDI) plays a crucial role in the economic literature,
especially in developing countries. It is also an important factor for policy makers to
analyze the relation between foreign direct investment and other important economic
variables. One of these variables is export which is always mentioned in Iran's
economic development programs.
In this study, the relation between foreign direct investment and export (with the
separation of oil exports, non-oil exports and total exports) between the years 1974
To 2009 has been analyzed by using cointegration method.
The results showed a positive relation between foreign direct investment term-short
a and profitability and intensity advertising en.costs ng between relation positive
the used we study optimizationsand non-oil exports in short-term. While the
relationship between foreign direct investment and total exports and oil exports are
negative. In the long-term, Although the relation between FDI and total exports and
also non-oil exports is negative, the relation between FDI and oil exports is positive.
Mohammad Hossein Mahdavi Adeli; Mohammadreza Kalaei
Abstract
"Structural adjustment" is the name given to a set of "free market" economic policy
reforms. Reforming of relative prices is the main building bloc of structural
adjustment programs. This paper attempts to compare the interactions among the
variables in the structural adjustment policy package with ...
Read More
"Structural adjustment" is the name given to a set of "free market" economic policy
reforms. Reforming of relative prices is the main building bloc of structural
adjustment programs. This paper attempts to compare the interactions among the
variables in the structural adjustment policy package with the status of theoretical
predictions by the Washington Consensus and at the same time, it investigate the
efficiency of correction in the relative prices in Iran. Therefore, in the first part of
the article, the concepts of adjustment and its roots in the Neoclassical theories and
structural adjustment limit is expressed. Then in the next section, it deals with
Schematic Summary of Iran's macroeconomic system and theoretical system of the
Washington Consensus. Then, the paper, with comparing the performance of
structural adjustment in both theoretical and real situations, assesses efficiency of
relative prices reform. In the third part, relying on specific characteristics of the
Iranian economy, difference between objectives of structural adjustment and its
consequences in Iran's economy is expressed. Results present "the structural
adjustment puzzle" and attention to this puzzle in the relative prices reform is the
most important recommendation in this article.
Mohammad Hossein Mahdavi Adeli; Reza Fahimi Dooab
Abstract
This paper investigates the effect of formal information and rumors on the real buyers’ choice in Tehran Stock Exchange. Following this study, the question is what kind of information has an effect on buyers’ choice of shares? The purpose of this study is to identify information affecting buyers ...
Read More
This paper investigates the effect of formal information and rumors on the real buyers’ choice in Tehran Stock Exchange. Following this study, the question is what kind of information has an effect on buyers’ choice of shares? The purpose of this study is to identify information affecting buyers selected stocks, in order to offer some solutions to enhance Stock Exchange performance. In this study, the mean test, Friedman test and Cronbach alpha coefficient were used to achieve results. The results indicate that rumors affect the buyers’ choice of shares, while formal data published by Stock Exchange or Stock Exchange member firms are not influential. As a result, the Stock Exchange needs to provide member firms with precise and reliable information in order to win their trust and following that help foster the efficiency of stock market.
Mahmood Hooshmand; Reza Fahimi Dooab
Abstract
Crude oil price and the U.S. effective exchange rate are two main economic variables that have had real effects on world welfare situation. The aim of this paper is to test whether there is a stable long-run relationship between oil prices and the U.S. dollar, expressed in real term. To this end, we ...
Read More
Crude oil price and the U.S. effective exchange rate are two main economic variables that have had real effects on world welfare situation. The aim of this paper is to test whether there is a stable long-run relationship between oil prices and the U.S. dollar, expressed in real term. To this end, we perform co-integration and causality tests between the two variables, using quarterly data from 1985:1 to 2008:4. Our results show that a 10% rise in the oil price coincides with a 1/8% depreciation of dollar in long-run, and that the causality runs from oil price to the dollar. Furthermore, we estimate the Vector Error Correction Model (VECM) to analyze the short-run behavior of real effective exchange rate and the speed of adjustment when it deviates from its long-run path. Results show that the speed of adjustment is 4/3 percent for each period that means in each period (or each season) the deviation of real effective exchange rate dollar from long-run path shrink to reach its long-run path.
Seyed Jafar Hosseini; Mohammad hossein mahdav Adeli
Abstract
Supply security of Energy is one of the main challenges of industrialized countries in recent decades. Also, it has been noted that in recent years other countries like new emergence Asian countries and Latin American countries, have understood the role and importance of energy. However, oil and gas ...
Read More
Supply security of Energy is one of the main challenges of industrialized countries in recent decades. Also, it has been noted that in recent years other countries like new emergence Asian countries and Latin American countries, have understood the role and importance of energy. However, oil and gas have more importance for numerous reasons such as convenience availability, high thermal value and relative cheapness of this energy resources compare to others. In this paper, with a view of the geographical distribution of reserves and consumption of crude oil and natural gas in various regions of the world, using descriptive - analytical reasons, the reasons of political economy of oil and gas formation in the Persian Gulf region are discussed. However, after mentioning the most important reasons for the formation of political economy of oil and gas in this region, the main strategies of industrialized countries to maintain security of energy supply and combat the consequences of the geographical distribution of oil and gas reserves will be explained. The results suggest that after the oil shocks of 70’s, the main strategy for industrialized countries to maintain security of energy supply is using of diversification of supply oil and gas origins.
Mohamad Hossien Mahdavi Adeli; Roh alah Nourouzi; Moheb alah Motaheri
Abstract
در این بررسی، نقش سرمایه گذاری مستقیم خارجی بر صادرات غیرنفتی با استفاده از الگوی خودتوضیح با وقفه های توزیعی (ARDL) و داده های سالیانه برای دوره زمانی 84- 1342 در اقتصاد ایران ...
Read More
در این بررسی، نقش سرمایه گذاری مستقیم خارجی بر صادرات غیرنفتی با استفاده از الگوی خودتوضیح با وقفه های توزیعی (ARDL) و داده های سالیانه برای دوره زمانی 84- 1342 در اقتصاد ایران مورد بررسی قرار گرفته است. نتایج نشان می دهد که سرمایه گذاری مستقیم خارجی بر صادرات غیرنفتی در بلندمدت و کوتاه مدت تاثیر مثبت دارد. علاوه بر این، افزایش نرخ ارز واقعی و کاهش شاخص جذب داخلی منجر به افزایش صادرات غیرنفتی می شود. نتایج برآورد مدل پویا نیز وجود رابطه بلندمدت بین متغیرهای توضیحی و صادرات غیرنفتی را تایید می کند. مدل ECM نیز حاکی از آن است که با وارد شدن یک بهانه به هر یک از متغیرهای توضیحی مدل نظیر سرمایه گذاری مستقیم خارجی، کمتر از 3 سال طول می کشد تا صادرات غیرنفتی، به سطح تعادلی خویش باز گردد.
