Mohammad Reza Lotfalipour; Nooshin Karimi Alavijeh
Abstract
One of the main issues in macroeconomics is the study of the relationship between interest rates and exchange rates, the effects of these two variables have been considered by politicians and policy makers. Therefore, in this study due to the two-rate exchange rate in the Iranian economy, the two official ...
Read More
One of the main issues in macroeconomics is the study of the relationship between interest rates and exchange rates, the effects of these two variables have been considered by politicians and policy makers. Therefore, in this study due to the two-rate exchange rate in the Iranian economy, the two official exchange rate and the unofficial exchange rate is used. Also in this research of interest rates, one-year deposit interest rate short term and long term is five years, which will be announced by the Central Bank of the Islamic Republic of Iran. In this paper, the exchange rate during the period 1974-2014 was estimated with particle swarm optimization algorithm and genetic algorithm. And according to performance criteria, models with particle swarm optimization algorithm was selected to investigate the relationship between interest rates and exchange rates. The results show that the interest rate on short-term and long-term with official and unofficial exchange rates have indirect relationship. In fact, interest rates will increase the value of the national currency. Also in this study, the rate of money growth and gross domestic product on official and unofficial exchange rate is positive. In other words, by increasing the growth rate of money and gross domestic product, the value of the national currency decreases.
behnam elyaspour; mohammadtaher ahmadi shadmehri; mohammadreza lotfalipour; mohammadali falahi
Abstract
The exchange rate has always been a fundamental issue in the economic literature because of its significant effect on economic performance. Iran is a country that earns important part of its income from foreign exchange earnings by selling mineral materials. This study, therefore, investigates the effect ...
Read More
The exchange rate has always been a fundamental issue in the economic literature because of its significant effect on economic performance. Iran is a country that earns important part of its income from foreign exchange earnings by selling mineral materials. This study, therefore, investigates the effect of exchange rate uncertainty on Iran’s non-oil trade balance for the period 1989-2015. Stochastic volatility model is used for calculating uncertainty index of exchange rate. Then, the effect of exchange rate uncertainty on Iran’s Non-Oil trade balance is estimated by using Rose and Yellen (1989) model and Johansen and Juselius (1990) cointegration procedure. The results indicate that real exchange rate and its uncertainty have a negative effect on Iran’s non-oil trade balance in long-run. Therefore, the Marshall-Lerner condition is not met. In addition, J-Curve is rejected due to impulse response functions.
Keyword: Real Exchange Rate, Non-Oil Trade Balance, Uncertainty, Stochastic Volatility Model, Cointegration
JEL Classification: C32, D80, F10, F31
Introduction
Since the advent of the current float in 1973, most countries have been concerned about the uncertainty that floating exchange rates have introduced into world markets. Most European countries have tried to avoid this uncertainty by joining the Euro zone and adopting a common currency, which has flavors of a fixed exchange-rate system. However, most other countries still have to deal with the side effects of exchange rate uncertainty since their exchange rates float.
There are several channels through which exchange rate volatility could affect the trade flows. First, if traders are risk averse, they could reduce their activities due to exchange rate uncertainty in order to avoid any loss. Second, exchange rate uncertainty could directly affect the trade volume by making prices and profits uncertain, especially in countries where forward markets do not exist such as the developing world. Even if forward markets do exist in some industrial countries, some studies indicate that forward markets are not very effective in completely eliminating exchange rate uncertainty. Third, if exchange rate volatility persists over a longer period of time, it could induce domestic producers to switch buying from foreign sources to domestic sources, reducing the volume of trade, especially traded inputs. Finally, exchange rate uncertainty could also affect direct foreign investment decisions which in turn could lower the volume of trade. To reduce the price fluctuation due to exchange rate volatility, production facilities would be located near final markets, leading to change in pattern of trade.
Considering the numerous economic changes affecting the exchange rate in the studied period (1989-2015) in Iran, like the oil price shocks, the change of commercial policies, and changing foreign exchange policies and economic sanctions, studying the effect of exchange rate fluctuations on the non-oil trade balance is essential.
Theoretical Framework
The relationship of exchange rate and trade balance is explained by various theoretical approaches like the elasticity approach, absorption approach, Marshall-Lerner Condition, J-Curve approach, monetary approach and the two countries imperfect substitution model approach.
Of these, the two countries imperfect substitution model of the Rose and Yellen (1989) is used in this paper to model the relationship between exchange rate and trade balance. This approach shows the nature of the relationship of real exchange rate on trade balance in both short and long run. It stipulates that depreciation of the real exchange rate improves trade balance. Besides, the model assumes that there are no perfect substitutes in the imports and exports for the locally produced goods and services.
Rose and Yellen (1989) start with a specification of the import demand equations. As in Marshallian demand analysis, the volume of imported goods demanded by the home (foreign) country is determined by real domestic (foreign) income and the relative price of imported goods. Clearly, real income has a positive impact on the volume of import demand, and the relative price of imported goods has a negative relationship
Methodology
This study, investigates the effect of exchange rate uncertainty on Iran’s non-oil trade balance for the period 1989-2015. Stochastic volatility model (SV) is used for calculating uncertainty index of exchange rate. Then, the effect of exchange rate uncertainty on Iran’s non-oil trade balance is estimated using Rose and Yellen (1989)’s model and Johansen and Juselius (1990)’s cointegration procedure.
An alternative to GARCH-type models is the class of stochastic volatility models, which postulate that volatility is driven by its own stochastic process. Estimation and inference of SV models are more complicated than for GARCH models. On the other hand, SV models have some advantages compared with GARCH models. For example, SV models offering a natural economic interpretation of volatility are easier to connect with continuous-time diffusion models with SV, and are often found to be more flexible in the modeling of financial returns. A variety of estimation methods have been proposed to estimate the SV models, in this paper MCMC methods are used to estimate of SV model.
Results and Discussion
The results show that all variables in trade balance model are integrated of first order or in short hand are I(1) and cointegration test suggests one cointegrating vector for this variables.
Briefly, the results of estimate vector show that real exchange rate, volatility of real exchange rate and GDP of Iran have negative effect on non-oil trade balance and GDP of the world has positive effect on Non-Oil trade balance.
Conclusions and Suggestions
The results of estimating trade balance in long-run show that real exchange rate has negative effect on non-oil trade balance; therefore, the Marshall-Lerner condition is not met. In addition to, J-Curve is rejected due to impulse response functions. Also, uncertainty of the real exchange rate has negative effect on non-oil trade balance; therefore, policy makers must adopt policies to help stabilize the real exchange rate.
nahid rajabzadeh moghani; mohamadreza lotfalipour; Ahmad Seifi; mostafa razmkhah
Abstract
Credit risk is one of the important risks in banking industry. So, identification of effective factors has been of substantial interest to banks. The aim of this paper is to identify factors that impact on credit risk with approach to time to approach.
In this study, a random sample of 5316 customers ...
Read More
Credit risk is one of the important risks in banking industry. So, identification of effective factors has been of substantial interest to banks. The aim of this paper is to identify factors that impact on credit risk with approach to time to approach.
In this study, a random sample of 5316 customers that borrowed from Maskan Bank during 1388-1393, is used. This paper, using common Survival Analysis models including Kaplan-Meier non-parametric model and proportional hazard Cox semi-parametric model, aims to identify effective factors affecting the default risk of costumers.
The results of non-parametric models, after categorizing variables based on frequency and Stepanova and Thomas (2002) technique, indicate that variables such as loan amount, number of installments, number of children, education, age,job type and job title have effect on survival probability and hazard rate curves. Entering variables simultaneously in Cox regression suggests that loan amount, number of installments, marital status, education, age and job type have effect on default risk of costumers. Harel and Lee test indicates that proportional hazard assumption for all variables is satisfied; hence theInterpretation of results is reliable. In addition diagnostics methods such as Cox-Snell, Martingle and Schoenfeld residuals all confirmed that the model fits well. So banks should pay attention to these variables when they want to decide about granting loans to costumers.
MohamadReza Lotfalipour; Somayeh Galdipour; Omid Arian
Abstract
Related-party transactions are one of the major concerns in financial market scandals. So that the intended use of these transactions and the non-disclosure or insufficient disclosure has been a deteriorating factor for the enterprises. Recent scandals in the United States, such as Adelphia and the Riga ...
Read More
Related-party transactions are one of the major concerns in financial market scandals. So that the intended use of these transactions and the non-disclosure or insufficient disclosure has been a deteriorating factor for the enterprises. Recent scandals in the United States, such as Adelphia and the Riga family's corporate group, and Hollinger and Conrad Black's corporate group, have brought related-party transactions under the spotlight (Ge, Drury, Fortin, Liu & Tsang, 2010). It is alsoa great concern in Iran, since accounting standard No.12 is dedicated to related-party transactions. Related-party transactions can be used within these corporate groups in order to optimize internal resource allocation, reduce transaction costs, and improve return-on-assets. On the other hand, these transactions, if used opportunistically by management or other stakeholders, can produce misleading operating results and adversely affect minority shareholders' wealth.
The FASB’s concerns about the non-arms-length nature of RP transactions raise concern about management and insider opportunism. FASB argues that potential wealth transfers can occur between the firm and the related parties, and RP transactions enable the firm to manipulate its financial statements (FASB, 1982). FASB’s concern about RP transactions clearly focuses on the lack of an arms-length transaction which makes RP transactions inherently susceptible to manipulation by management for their own gain. Furthermore, financial statement manipulation can interfere with accounting-based contracting and monitoring. The management opportunism view suggests the market will view RP transactions negatively (Kohlbeck & Mayhew, 2009).
Management opportunism was a key driver in the misappropriation of assets and misleading financial reporting in the recent frauds at Enron, Healthsouth and other firms. In many of these frauds, management allegedly used RP transactions both to enrich themselves and to generate misleading financial statements. For example, Enron engaged in a number of large purchases and sales with related entities producing earnings that would not have otherwise been recognized (Swartz & Watkins, 2003). At the same time, the transactions significantly increased the CFO and other officers’ wealth. Kalyta and Magnan (2008) document that powerful CEOs extract rents using executive pensions where the disclosures are of lower quality. Erickson et al. (2000) also describe in detail how RP transactions enabled Lincoln Savings and Loan to meet important regulatory capital constraints, but later led to its collapse. While RP transactions can be opportunistic, they can also potentially fulfill the underlying needs of the company. For instance, some companies make strategic investments in joint ventures to obtain and secure access to supplies or markets (e.g. vertical integration) and to manage risk. Transactions between RP and firms also generally involve less information asymmetry between the two parties, than is typically the case when the transaction occurs between the firm and a third-party.
Prior research documents that financial statements contain value relevant information. For example, Bao and Chow (1999) show that reported earnings and book values are significantly associated with share prices for sample firms issuing shares to foreigners. They also show that the combined explanatory power of earnings and book values has increased over time. Haw, Qi, and Wu (1999) document a significant association between stock returns and changes in earnings in both long-window and short-window studies. By using both return specifications and price specifications. Chen, Chen, and Su (2001) provide evidence that accounting information, including earnings and book value, is value relevant in the Chinese markets. Overall, the empirical evidence from prior research suggests that earnings and book values are value relevant to investors. We examine the value relevance of disclosed RPTs in corporations and focus on two types of RPTs: sales of goods and sales of assets.
Methodology
The present study in terms of objective is categorized as an applied research, and in terms of the methodology is a descriptive research. And, among the descriptive studies, this is a correlational research. The analysis and test of the hypotheses were done according to the proposed hypotheses and functional definition of the dependent and independent variables based on the Pierson correlation coefficients and by using multi-variable regression
analyze at the 5% Significance Level. Also, by defining the R2 coefficient, the changes of the dependent variables versus independent variables were analyzed. In the present study, the Student statistics (t) was used in order to investigate the accuracy of the research hypotheses and the Fischer statistics (f) was used in order to investigate the adequacy (efficiency) of the proposed model. Moreover, in order to investigate the normality of the data which is prerequisite of the accuracy test of the hypotheses, Kolmogorov-Smirnov test was used, and finally in order to analyze the hypotheses and supplementary tests in order to validate the regression model, Eviews software was applied. In order to achieve the above mentioned objectives, the following hypotheses are proposed:
Hypothesis1: Sales of goods to related parties affects the earning relevance in determining the market value of shares.
Hypothesis2: Sales of assets to related parties affects the earning relevance in determining the market value of shares.
The following models were designed on the basis of Ge et al.’s 2010 model :
Price it = β0 + β1 BV it + β2 EPS it + β3 EPS it*S goods it +ε it
Price it = β0 + β1 BV it + β2 EPS it + β3 EPS it*S assets it +ε it
where:
Price: Stock price in end of year;
BV: book value of equity per share;
EPS: annual earnings per share;
Sgoods : dummy variable, coded 1 for firms selling goods to related parties and 0 otherwise;
Sassets : dummy variable, coded 1 for firms selling fixed assets to related parties and 0 otherwise.
Results and Discussion
Hypothesis1
According to the obtained EPS correlation coefficients (sig = 1.5463), it can be concluded that there is a positive and significant relationship between the EPS and the stock price of the companies, and it decreases to 0.0078 after including the interaction term EPS*S goods. This represents a reduction of profits in companies that are related party transactions of sales of goods. As the valuation parameter of EPS in our valuation model is a function of earnings persistence, macro-economic and time-specific factors, this difference may not be caused by the standard adoption. Our interaction terms distinguish the coefficient of EPS between firms with and without related-party sales during the same time-period, and we draw our inferences about the impacts of the standard adoption from the coefficient estimates of the interaction terms. Prior research documents that financial statements contain value relevant information. For example, Bao and Chow (1999) show that reported earnings and book values are significantly associated with share prices for sample firms issuing shares to foreigners. They also show that the combined explanatory power of earnings and book values have increased over time. Haw, Qi, and Wu (1999) document a significant association between stock returns and changes in earnings in both long-window and short-window studies. By using both return specifications and price specifications. Chen, Chen, and Su (2001) provide evidence that accounting information, including earnings and book value, is value relevant in the Chinese markets. Overall, the empirical evidence from prior research suggests that earnings and book values are value relevant to investors.
Hypothesis2
According to the obtained EPS correlation coefficients (sig = 2.2131), it can be concluded that there is a positive and significant relation between the EPS and the stock price of the companies, and it decreases to 0.0033 after including the interaction term EPS*Sassets. This represents a reduction of profits in companies that have related party transactions of sales of assets, but it is not significant, because the p-value of interaction term EPS*Sassets(0.413) is more than .005. As the valuation parameter of EPS in our valuation model is a function of earnings persistence, macro-economic and time-specific factors, this difference may not be caused by the standard. Our interaction terms distinguish the coefficient of EPS between firms with and without related-party sales during the same time-period, and we draw our inferences about the impact of the standard adoption from the coefficient estimates of the interaction terms. Prior research documents that financial statements contain value relevant information. For example, Bao and Chow (1999) show that reported earnings and book values are significantly associated with share prices for sample firms issuing shares to foreigners. They also show that the combined explanatory power of earnings and book values have increased over time. Haw, Qi, and Wu (1999) document a significant association between stock returns and changes in earnings in both long-window and short-window studies. By using both return specifications and price specifications. Chen, Chen, and Su (2001) provide evidence that accounting information, including earnings and book value, is value relevant in the Chinese markets. Overall, the empirical evidence from prior research suggests that earnings and book values are value relevant to investors.
Conclusions
The purpose of this study was to investigate the effect of related-party transactions on the value relevance of earnings in determining the market value of the shares of the companies listed in the Tehran Stock Exchange. This study focuses on two types of related-party transactions includingsales of goods and materials, and sales of fixed assets to related-parties. For achieving this purpose, 164 companies listed in Tehran Stock Exchange were analyzed during the years 2009 to 2015. Research hypotheses were tested using multiple regression and panel data methods with fixed effects Estimation method used for the analysis of survey data in multiple regression.
The results indicated that value relevance of earnings in determining the market value has been reduced in the companies that have related-party transactions using sales of goods and materials. Also, related-party transactions using sale of fixed assets did not have significant effects on value relevance of earnings in determining the market value of firm.
Mohammad Reza Lotfalipour; Aazam Zabihi; Mhammad Ali Shabani
Abstract
During the last recent decades, Restructuring in the electricity industry has been considered as an economical policy. Consequently, it was able to increase private investment, competition, efficiency, and productivity. The purpose of restructuring electricity industry is to change electricity industry ...
Read More
During the last recent decades, Restructuring in the electricity industry has been considered as an economical policy. Consequently, it was able to increase private investment, competition, efficiency, and productivity. The purpose of restructuring electricity industry is to change electricity industry organization, in order to omit monopoly and increase competition. Recognition of restructuring trend and its elements can help the process of choosing and adapting it with Iran's electricity industry. The purpose of the present study is to investigate the effects of restructuring on productivity of employed workforce in Iran’s electricity industry. In order to examine the way restructuring and other effective elements would affect industry productivity; the methodology of Auto Regressive Distributed Lag Models (ARDL) was used. Results indicate that both in the long term and short term, the restructuring variables have positive and meaningful effects on both the productivity of employed workforce in electricity industry and electricity intensive in Iran.
Mohammadreza Lotfalipour; Majid Derakhshani
Abstract
The aim of the paper is to survey factors productivity in Small & Medium Scale Manufactories located in Toos industrial town. In order to achieve this purpose, production functions of different industrial groups are estimated on the base of cross-section data in 2005. Then elasticity of factors production, ...
Read More
The aim of the paper is to survey factors productivity in Small & Medium Scale Manufactories located in Toos industrial town. In order to achieve this purpose, production functions of different industrial groups are estimated on the base of cross-section data in 2005. Then elasticity of factors production, average productivity, marginal productivity, labor intensive and capital intensive are derived from the functions. Obtained results indicate that except basic metal industries, all groups and total industry had increasing returns to scale. Moreover the maximum of labor & capital productivity belongs to the food industry & industrial equipment group respectively. Also the maximum of labor intensive belongs to food industry and the maximum of capital intensive belongs to industrial equipment group.
Mohamadreza Lotfalipour; Ghasem Ghamkhar
Abstract
قیمتگذاری کالاها و خدمات تولیدی توسط دولت از مهمترین مباحث اقتصادی است چون هر نوع تغییر قیمت از یک طرف بر رفاه مصرفکنندگان تأثیر میگذارد و از طرف دیگر کمیت و کیفیت ...
Read More
قیمتگذاری کالاها و خدمات تولیدی توسط دولت از مهمترین مباحث اقتصادی است چون هر نوع تغییر قیمت از یک طرف بر رفاه مصرفکنندگان تأثیر میگذارد و از طرف دیگر کمیت و کیفیت تولید کالاها و خدمات را متأثر میسازد. این مقاله درصدد محاسبه قیمتهای بهینه گاز طبیعی برای بخشهای مختلف اقتصاد شامل بخشهای خانگی، تجاری - عمومی و بخش صنعتی از طریق روش قیمتگذاری رمزی میباشد. بدین منظور ابتدا تقاضای بازار برآورد شده وسپس کششهای قیمتی تقاضا برای بخشهای مختلف اقتصادی محاسبه شده است. با توجه به این که قیمتگذاری رمزی بر اساس شرط بازده صعودی نسبت به مقیاس میباشد، و یکی از فرضهای آن انحصار طبیعی است، پس از برآورد تابع تولید گاز طبیعی، مسئله وجود بازده صعودی نسبت به مقیاس در این صنعت بررسی شده است. پس از تعیین تابع تولید، هزینه نهایی صنعت بدست آمده و در نهایت با حل دستگاه معادلات رمزی از طریق بسته نرمافزاری Matlab قیمتهای بهینه برای هر بخش در سال 1384 محاسبه و با قیمتهای جاری مقایسه گردیده است. این قیمتها براساس کششهای تقاضای بخشها و در نظر گرفتن عدم زیان شرکت ملی گاز استان خراسان استخراج گردیدهاند.
