Habib Habibi Nikjou; ali cheshomi; mostafa salimifar
Abstract
1- INTRODUCTIONEconomic uncertainty is one of the important and influential factors on economic policies and their results, and in such a situation, rational decisions are replaced by other methods. Various studies has shown the effect of economic uncertainty on inflation, investment, economic ...
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1- INTRODUCTIONEconomic uncertainty is one of the important and influential factors on economic policies and their results, and in such a situation, rational decisions are replaced by other methods. Various studies has shown the effect of economic uncertainty on inflation, investment, economic growth, consumption and demand for money.Uncertainty is difficult to measure due to its invisibility, and as the uncertainty measurement methods improve, the measurement of its effect on various economic variables and markets and the prediction of their behavior in response to the actions of economic agents will be more accurate.The main aim of this article is to measure the economic uncertainty index by using news published in social networks. This method of measurement has become very important with the widespread use of social networks. 2- THEORETICAL FRAMEWORKUncertainty is one of the most controversial concepts in the philosophy and methodology of economics. The history of the concept of economic uncertainty goes back to David Hume. There are three categories of theories about economic uncertainty. The first group believes that the future reality is unchangeable and predetermined and economic decision makers have perfect information. In this view, there is no such thing as uncertainty and the world is in complete certainty. 18th century the economists of were the first group to present this theory. The second group believes that the reality of the future is unchangeable and predetermined and the decision makers are able to know the future. These economists use objective conditional probability functions to solve the future uncertainty problem. The third class considers the future reality to be changeable and unknown. The starting point of these theories started from the study of the Chicago school economist Frank Knight titled "Risk, Uncertainty and Profit". He clearly distinguished between the two concepts of risk and uncertainty. Keynes also reached the same results as Knight. In general, in a situation where the economy has a high level of uncertainty, the theories of the first and second category have a good explanation. But in confronting with exogenous shocks such as the corona virus epidemic, war and financial crisis, the concept of uncertainty will be more appropriate in the theories of the third category. This study will measure this index based on fundamental uncertainty (the third category). 3- METHODOLOGYIn this article, the economic uncertainty index in Iran was measured from January 2017 to December 2020 by monitoring and analyzing 3,117,960 news from 28 popular and influential Iranian Telegram channels. To analyze these news, we used "supervised machine learning" methods. In the first step, 13,404 news items were labeled by human evaluators according to their impact on uncertainty. The labels had two modes "affecting uncertainty" and "neutral". Then by using four algorithms ("C4.5" from decision tree methods, "Multilayer Perceptron" from artificial neural network methods, "Logistics" from function-oriented methods and "Simple Bayes" from Bayesian methods) labeling of the whole news was done. The economic uncertainty index was calculated numerically and based on the number of news items that affect economic uncertainty, the measurement and value of this index was standardized, and then the quality of the index was evaluated with historical evidence, relabeling and comparison with the index based on Google data. 4- RESULTS & DISCUSSIONAmong the 4 media-based uncertainty indicators, 3 indicators can better explain the historical events of this period. Among them, the best performance is determined by C4.5 algorithm from the decision tree methods. After this algorithm, multilayer perceptron, logistic has the best performance and the weakest performance belongs to the simple Bayes method. Media-based economic uncertainty index trend with C4.5 method is consistent with the important events of the study period, in such a way that the highest level of uncertainty occurred during the period when Trump announced his withdrawal from the JCPOA until the official withdrawal of the United States from the JCPOA. In general, it can be said that the fluctuations of the economic uncertainty index have been limited and have several jumps, which are due to the withdrawal of the United States from the JCPOA, the oil embargo and the assassination of Sardar Soleimani.In the logistic algorithm, the highest level of uncertainty dates back to the end of 2020. The period that coincides with Trump's presidential election. The level of economic uncertainty increases after Trump's official withdrawal from the JCPOA and reaches its peak with oil sanctions.The output of the multilayer perceptron algorithm indicates that the average level of uncertainty has not changed significantly. In the simple Bayes algorithm, the highest level was also reached during the period of the withdrawal of the United States from the JCPOA and the increase in enrichment. The results of the regression showed that economic uncertainty has a positive and significant effect on the average logarithm of the exchange rate with multilayer perceptron, logistic and simple methods. This effect is larger in the multilayer perceptron model, which had better performance based on machine learning indicators. 5- CONCLUSIONS & SUGGESTIONSThe calculated economic uncertainty index is consistent with the important events of the study period, such as the US withdrawal from the JCPOA, Iran’soil sanctions, and the escalation of the US confrontation with Iran in the assassination of Sardar Soleimani. It is suggested that daily calculation of this index be used to reduce uncertainty in the managing future events. We employed GARCH model to test effect of Media-based Economic Uncertainty index on Iranian exchange rate. The results showed that Economic Uncertainty index has poisitve effect on exchange rate.
Sareh Dorafshanian; Mostafa Salimifar; Ali Hussein Samadi
Abstract
Abstract Expanded 1-INTRODUCTIONThis study aimed to estimate and compare the effect of applying some principles of corporate governance on credit risk of selected private and public banks in Iran during 2011-2018. In the present study, after calculation of the credit risk by using the Basel Committee's ...
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Abstract Expanded 1-INTRODUCTIONThis study aimed to estimate and compare the effect of applying some principles of corporate governance on credit risk of selected private and public banks in Iran during 2011-2018. In the present study, after calculation of the credit risk by using the Basel Committee's proposed model for each bank, the relationship between shareholder rights and board size as two variables representing corporate governance principles, bank size and return on assets as control variables on the credit risk has been estimated. The results of the study indicate that in both groups of public and private banks, shareholder rights have no significant effect on credit risk. Increasing the size of the board of directors in public banks reduces credit risk more than private banks. Increasing the size of banks increases the credit risk in both groups of public and private banks. In private banks, increase in return on assets reduces credit risk, whereas in public banks, return on assets has no significant effect on credit risk. 2-THEORETICAL FRAME WORKBanks are encountered with numerous risks, including liquidity risk, reputational risk, market risk, exchange rate risk, and credit risk, in their business process, which are posed by several factors in the banking system. Credit risk is one of the main financial market risks, which has long been a hotbed for debates and leads to the bankruptcy of financial institutions such as banks Nowadays, high credit risk is considered as one of the major causes of bank bankruptcy The term ‘bankruptcy’, however, can not be easily defined, and each financial institution can define a situation in which bankruptcy occurs. Generally, this concept can be defined as follows: A delay in repaying the debts or the interests of the loans. Moody (2005) defines bankruptcy as a failure or delay in repaying bank debts or their interest. In another definition, it is referred to as borrower’s failure or unwillingness to repay debts. According to the guidelines of the Basel Committee, as a subcommittee of the International Settlement Bank and the supreme international body involved in banking supervision, credit risk involves three main parameters:1) Probability of Default (PD): The probability of failure in a customer to fulfill his commitments regarding repaying debts.2) Loss Given Default (LGD): Amount of loss (in assets) caused by bankruptcy and not compensated by the party of the contract.3) Exposure at Default (EAD): This term indicates the maximum risk tolerated and accepted during bankruptcy.3-METHODOLOGYAs maintained, corporate governance principle is one of the main variables, whose critical impact on the credit risk has been of concern over the last two decades. According to the OECD (2004), corporate governance encompasses a series of relations among managers, board members, shareholders, and other stakeholders. It provides a framework through which the organizational goals are identified. Appropriate corporate governance provides extensive and efficient monitoring in achieving the goals. Corporate governance contains the method of defining the strategic objectives of the company, the means of achieving such objectives, and the methods of monitoring the performance and relations in the company. The corporate governance aims at transparency and effective use of resources to modify the relationships among stakeholders. It also promotes the credibility and belief of shareholders and stakeholders, attracts more investment, and protects existing investments as well. Furthermore, it offers a system for controlling and balancing the enterprises. The guidelines of the Basel Committee highlight the need to apply corporate governance principles to improve the credit risk management process. The method proposed in this study to estimate the credit risk of the banks was based on the Basel Committee’s proposal on credit risk management. For this purpose, each bank's credit risk was estimated as an internal and unique variable for the same banks.4-RESULTS The most significant finding of this study deals with the return on assets in the private and public banks. According to the findings, while increasing the return on assets in the private banks reduces credit risk, an increase in the return on assets in the public banks has no significant impact on their credit risk. This might be due to the lack of transparency in the data and financial statements and its components by the public banks as these banks publish statistics based on the expectations of their performance rather than the reality of the performance. In other words, they submit manipulated financial statements with some unreal rows, which makes our rational assumptions underpinned by some theoretical foundations on the inverse relationship between return on assets and credit risk not be observed in Iran’s public banks. To put it in other words, the return on assets presented by the public banks is often the result of unreal revaluations of assets, regardless of depreciation, but not the actual increases in the return on assets.5-CONCLUSIONS & SUGGESTIONSThroughout the last two decades, credit risk has been the most important challenge with which the banks have been tackling as such they have always sought to identify and manage effective variables to minimize losses. The studies over the past two decades have highlighted the impact of corporate governance on the stability and risk decrease in financial institutions. This study aimed to estimate the credit risk in private and public banks listed in stock exchange and to analyze and compare the impact of board size and shareholder rights (as a corporate governance proxies) along with the size of the banks, and their return on the credit risk of these two groups. According to the findings and as a practical recommendation, there should be legal requirements for the banks to homogenize the dissemination of their data and information. Furthermore, providing the grounds to clarify the performance of the banks in terms of their assets and liabilities and to disseminate realistic information in the relevant communities would lead the findings of the studies on the banking system toward reliable theories and make them closer to the real world.
soheil roudari; masod homayounifar; mostafa salimifar
Abstract
Introduction: The banking network plays a prominent role in the financing of businesses. In recent years, due to increased government spending and disproportionate increases in government revenues, a budget deficit has been created, and due to the high dependence between the government and the banking ...
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Introduction: The banking network plays a prominent role in the financing of businesses. In recent years, due to increased government spending and disproportionate increases in government revenues, a budget deficit has been created, and due to the high dependence between the government and the banking network, in some cases increased current spending has been provided through borrowing from the banking network. Theoretical Framework: One of the most important factors that effect on the formation of the financial crisis is the instability in other financial markets, especially the exchange rate, which affects the GDP of the country and the current expenditures of the government, and affecting the performance of the banking sector subsequently. By affecting the government budget, the exchange rate can affect the motivation of the government and government-affiliated companies to obtain loans and facilities from the banking network. Also, the increase in the exchange rate by increasing the cost of goods and services leads to a decrease in disposable income and subsequently a decrease in people's consumption. According to dependence of industrial sector to imports of intermediary goods, changes in exchange rate causes a change in the supply sector (Boschi & D' Addona, 2019). On the other hand, exchange rate volatility due to the uncertainty and increases in the cost of production has been effective on government debt to the banking system and current expenditures (Adrian & Shin,2010). Methodology: In this study, using the wavelet transform model during the period of 1388-1397 monthly, the nominal exchange rate volatilities, government debt to the banking network, and current government expenditures are divided into three levels by using wavelet transform. In fact, wavelet transform explains the deviation from the main trend. To examine the relationship between the variables, the use of patterns such as Granjer causality is used, which provides a momentary criterion of causality test, therefore, it is unable to analyze the dynamics and reliability of variables relationship. In addition, in such methods, because the lag of variables can be used, it is possible to eliminate the immediate effects. Spectral analysis is used to solve this problem (Aguiar, et al.,2008). Results and Discussion: In the short term, there is no significant correlation between nominal exchange rate fluctuations and current government spending fluctuations. Interestingly, there is a significant correlation between government debt to banking network fluctuations and exchange rate fluctuations. This indicates that about 17% of the fluctuations in the foreign exchange market and government debt to the banking network are consistent. Significantly, there is a relatively high correlation between government debt to banking network fluctuations and current government spending fluctuations in the short term, and about 32.5 percent of changes and fluctuations in each have led to a change in the other one, and in fact It can show the lack of independence of the country's banking network and the dependence and attitude of the government to provide current expenses from this source. There is a positive and significant correlation between nominal exchange rate fluctuations and current government spending fluctuations in the medium term. Of course, only about 19% of the fluctuations in each are positively followed by other fluctuations. In the medium term, the movement between exchange rate fluctuations and government debt to banking network fluctuations increases compared to the short-term (0.26), and this can also indicate the delayed effects of the exchange rate. Interestingly, there is a high correlation between government debt to banking network fluctuations and current government spending fluctuations, and over a longer period the fluctuations between the two are more intense in terms of intensity and direction. The time factor plays a very important role in the correlation between government debt fluctuations and exchange rate fluctuations. The correlation between these two cases started from about 0.17 in the short term and reached 0.53 in the long run. In terms of time factor, it has shown more biger about fluctuations in current government expenditures and fluctuations in government debt to banks than the other cases. The correlation between the two fluctuations has risen from 32.5 percent in the short term to 76 percent in the long term. Conclusions and Suggestions: government and the banking network have a close relationship with each other, and this relationship is due to the fact that many of the country's banks are state-owned be greater in the long run. In fact, this is one of the main reasons for the non-performing loans in the country's banking network, and the government has used its bargaining power to cover its current expenditures, which have been very volatile in recent years and take loans and did not pay on time. In fact, based on the results, banking network has been a tool to cover current government expenditures, and due to exchange rate fluctuations in the country and increasing government current expenditures, government debt to the banking network can increase and reduce the credit ability of the banking network and can lead to inefficient allocation of resources.
Mohammad Ali falahi; mostafa salimifar; fateme mardani
Abstract
Introduction
One of the advantages of Friedman’s theory for committing to a monetary policy is that firms, workers and consumers would be able to form their expectations about the future policies implemented by the central bank and monetary authorities. The intuition of the time inconsistency concept, ...
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Introduction
One of the advantages of Friedman’s theory for committing to a monetary policy is that firms, workers and consumers would be able to form their expectations about the future policies implemented by the central bank and monetary authorities. The intuition of the time inconsistency concept, introduced by Kydland and Prescott (1977) who won the Nobel Prize in Economics, is about a situation in which “being optimal in past” is different from “being optimal in future”. This problem arises, because the preferences of individuals would change during the time of making decisions until the time of implementing the chosen policy. If private sector knows and believes that the central bank is committed to a certain inflation target, then, the economic performance will improve by lower inflation expectation and lower inflation rate at a given rate of unemployment. But sometimes when the announced policy is believed by private sector, the authorities get incentives to change the policy in order to lower unemployment by making an unexpected inflation. Therefore, the unemployment would be lower than natural rate and the production level would rise more than full employment level.
In this study, the existence of time inconsistency in Iran’s economy is examined in both the long-run and short-run terms based on Ireland model (1999). For the long-run, the existence of cointegration between quarterly variables of inflation and unemployment time series is tested for 1990:5 to 2015:5 and 2002:4 through 2015:5 in short-run in order to explain the dynamics and co-movement of inflation and unemployment including unobserved shocks, state space equations and Kalman filter approach are used.
Theoretical Framework
Time inconsistency concept can help to understand the incentives of policymakers to change a policy during time. If policymakers can surprise the private sector, they will attain their goals at a lower cost. But, due to rational expectations, the incentives according to time inconsistent behavior can lead to an inflationary orientation in monetary policy. The inflationary bias as described by Kydland and Prescott (1977) comes from the inability of monetary authority to commit to a low-inflation policy.
Methodology
In this study the Ireland (1999) model is applied, which is based on Barro-Gordon’s model (1983). Barro-Gordon model explains the behavior of unemployment rate based on Philips Curve and introduces an objective function for the central bank with two variables, namely, inflation and unemployment rate.
Ireland describes a more general autoregressive process for unemployment rate which contains a unit root and presents a control error term for inflation. As a result, Ireland explores long-run and short-run relationships between these two variables. If both variables have a unit root, then, one can examine the cointegration relationship between them which is confirming the existence of time inconsistency problem in the economy for the long-run term. For the short-run relationship, state-space model and Kalman filter approach are used. This study examines both terms in Iran’s economy for two quarterly times series variables 1990:5 to 2015:5 and 2002:4 to 2015:5.
Results and Discussion
For the first part, testing the cointegration constraint, Augmented Dickey-Fuller test is applied to check for the unit roots in the two series. The results show the process for unemployment contains a unit root in either sample period. The Johansen test and the likelihood ratio statistic are used to test the null hypothesis of no cointegration. The result of Johansen test rejects the null hypothesis of no cointegration between inflation and unemployment at the 0.01 significance level for the full sample and at the 0.1 significance level for the post-2002 sample. Thus, as predicted by the model, the two variables are cointegrated.
To understand the theory's implications for the short-run behavior of inflation and unemployment, the maximum likelihood estimates of the model's parameters are obtained by mapping the constrained ARMA model into the state-space form and using the Kalman filter to evaluate the likelihood function, as suggested by Hamilton (1994). At 0.01 critical value for a chi-square random variable with 10 degrees of freedom, based on model’s structure, the likelihood ratio tests do not reject the model's short-run restrictions.
Conclusions and Suggestions
Does the time-consistency problem explain the behavior of inflation in Iran? Barro and Gordon's (1983) model of time-consistent monetary policy implies that long-run trend in the natural rate of unemployment will introduce similar trend into the inflation rate when the central bank cannot commit to a monetary policy rule. Tests of the model's short-run restrictions, indicate that the model is also successful at accounting for the dynamic, quarter-to-quarter co-movement of inflation and unemployment in Iran.
The results can potentially explain the persistent inflation in Iran’s economy. In other words, in Iran’s economy which the policymaker’s decision often related to short-run term and their decisions are variable and unstable, the consideration of the outcomes of time inconsistency behavior could be useful. However, because of the major role of oil income in the economy, there are a lot of unexpected shocks which can limit the government to commit to a rule. Thus, considering not an optimal amount but an optimal range of discretionary behavior would be desirable.
Nava Ramezanian Bajgiran; Mostafa Salimifar; Ali Akbar Naji Meydani; Mohammad Salimifar
Abstract
According to endogenous growth theories, knowledge, innovation and technology are the most important factors affecting economic growth. There is also the view that economic growth can in turn expand the innovation and inventions by facilitating access to the financial resources for the entrepreneurs. ...
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According to endogenous growth theories, knowledge, innovation and technology are the most important factors affecting economic growth. There is also the view that economic growth can in turn expand the innovation and inventions by facilitating access to the financial resources for the entrepreneurs. In other words, there may be a circular flow between innovation and economic growth. Despite the importance of innovation in the economy, little has been done about this subject, especially in developing countries. Hence, this study was designed to investigate the causal relationship and correlation between innovation and economic growth in selected MENA countries during 1995 to 2011, using a vector error correction model and panel data econometrics. The findings suggest that there is a one-way causal relationship from innovation to economic growth in both the short and long run; however, there is no correlation between innovation and high-tech exports with economic growth. Also, foreign direct investment, gross capital formation and GDP growth rate of the previous periods, unlike the government expenditure variable, have significant positive relationship with economic growth
sayyed mohamad mirhashemi dehnavi; Mostafa Salimifar; Mohammad Ali Falahi
Abstract
Iran’s economy and also stock market can affected by oil price shocks. With regarding importance of oil price changes on Iran economy, the aim of this study is to investigate the asymmetric impacts of oil price shocks on Tehran Exchange Price Index (TEPIX).
In this study, the relationship between ...
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Iran’s economy and also stock market can affected by oil price shocks. With regarding importance of oil price changes on Iran economy, the aim of this study is to investigate the asymmetric impacts of oil price shocks on Tehran Exchange Price Index (TEPIX).
In this study, the relationship between oil price shocks and TEPIX from 2000:6 to 2010:11 have been investigated. For this aim, the mothod of vector autoregressive regression (VAR), impulse response function and variance decomposition with three control variables of liquidity, constraction price index and gold price have been used.
The investigation of the asymmetric effects of oil price shocks on TEPIX by Mork (1989) and Hamilton’s approach revealed that oil price shocks have asymmetric impacts on TEPIX and in both approaches, oil price decrease has greater share in explanation of forcasting error variance of TEPIX respect to oil price increase.
