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.
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 ...
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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.
sayedeh zahra shakeri; Masoud Homayounifar; Mohammad Ali Falahi; Saeed
Abstract
Introduction
The savings becomes to invest in the capital market and then import into the production cycle and helps to the development and growth of countries. However, inefficient capital markets, cause savings to flow into real assets. Gold is a real asset, liquidity with high strength, and a suitable ...
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Introduction
The savings becomes to invest in the capital market and then import into the production cycle and helps to the development and growth of countries. However, inefficient capital markets, cause savings to flow into real assets. Gold is a real asset, liquidity with high strength, and a suitable replacement for money. This wealth is a booming market in Iran. Fluctuations in the price of gold in addition to the influence of other markets can also affect other markets. Therefore, it is important for the state and the people to understand the trend in the price of gold and gold coins. The gold price forecast will help policymakers to make the right decisions. On the other hand, it is difficult and complicated to accurately predict the real variables. We need to recognize the structural nature is predictable pattern. In this article, chaos theory was used to identify the structural nature of the time series of Bahar Azadi gold coin.
Theoretical Framework
Chaos theory analysis of the systems that have non-linear relationships and irregular time series. Economic time series variables follow a stochastic process and thus are not predictable. However, the series are not random, and are expected in the short term. There are tests for chaos in time series, such as correlation dimension, BDS, and Lyapunov exponent maximum test. Results of the study by Kim et al. (2003) showed that the BDS test is more efficient than other tests.
Methodology
For the purpose of this study, the non-linearity of the BDS test, and the Lyapunov exponent maximum test of the chaotic time series were used. BDS test was conducted in three stages: the original data, the residual of ARIMA, and the residual of GARCH. To determine the structure of time series of Bahar Azadi gold coin, 1670 observation was divided into 8 groups of the two hundred. Null hypothesis test is the IID and independent data. The Lyapunov exponent maximum test check on all data. Positive values of the statistics indicated the existence of chaos in the system. R and MATLAB software were used for data analysis.
Results
First, the stationary data were checked. Dickey-Fuller test the null hypothesis is accepted, which implies the existence of a unit root. The first stage of BDS test was performed on the original data in the dimensions inscribed. The results showed that the null hypothesis was rejected, except the first group. As a result, the original data were not IID, and linear or non-linear dependence exists between them. Before the second phase of the test, the appropriate ARIMA model was selected. The unit root test was performed on the residual of ARIMA, and the null hypothesis was rejected. As a result, BDS test was conducted on the residual ARIMA. In the third stage, first the variance heterogeneity was checked, white test the null hypothesis is rejected, thus confirming the heterogeneity of variance. Then, the existence of ARCH effect was checked. ARCH effect in the first five groups, GARCH effect in the next three tests by Ljung-Box and LM-ARCH was confirmed. According to the BDS test conducted on the residual of GARCH, the null hypothesis was rejected, which residual IID, and linear and nonlinear dependence does not exist, thus confirming the process of chaotic time series data structure of Bahar Azadi gold coin. Wolfe algorithm was used in this study to calculate the Lyapunov exponent maximum test. The results showed that the Lyapunov exponent was small and positive for all aspects and intervals.
Conclusion
As a result, time series of Bahar Azadi gold coin is possessed of a chaotic process. So we can predict future prices with the non-linear model in this series.
