Financial monetary economy
Yaser Moomivand; seyyd mohammadbagher najafi; Kaveh Derakhshani Darabi; jamal fathollahi
Abstract
Monetary policies are one of the most important policy tools for improving economicvariables, including inflation and production. Monetary policy is currently a dynamic andchallenging field of economic sciences, theoretically and empirically. The views on the effectof monetary policy on production vary ...
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Monetary policies are one of the most important policy tools for improving economicvariables, including inflation and production. Monetary policy is currently a dynamic andchallenging field of economic sciences, theoretically and empirically. The views on the effectof monetary policy on production vary from the ineffectiveness and neutrality of money inthe short and long term to the effectiveness of monetary policy and its effect on production inthe long term and even in the short term.2. Review of the literatureInstitutional aspects and their effect on economic variables and the economic performance ofdifferent societies have been attracted by experts in the field since the 1980s and led to thedevelopment and expansion of its literature in the 1990s. Moreover, the valuable works ofNorth and Coase, as well as, winning the Nobel Prize in Economic Sciences for their effortsto introduce institutional analyses put forward institutionalism as one of the leading economictheories. According to this literature, it can be stated that the same impulses and policies canbe followed by different reactions due to temporal and spatial differences in the institutionalenvironment in which they happened (Dehghan Monshadi, 2019).2.1. The effect of governance on the effectiveness of policiesThe new economic literature emphasizes the importance of institutions and governanceconditions in the economic development process and the performance of economic policies.Governance has a long history and has been defined in different ways. It literally meansdomination, ruling, and strategic government, but it means the activity of countrymanagement and control of a company or organization in the Oxford English Dictionary(Gholipoor, 2004).3. Materials and methodsThis research investigated the effect of variables on the effectiveness of monetary policyusing the model introduced by De Mendonça and Nascimento (2018), which is presented asRelation (1).(1)where is the index obtained for the effectiveness of the monetary policy in the i th country inthe t th year, GGI is the index of good governance, and X is other economic variables affectingthe effectiveness of the monetary policy, such as the degree of openness of the economy, thedevelopment of financial markets, and virtual variable of the existence of the inflationtargeting policy in the relevant country. In the years with the inflation targeting policy, thevalue was set to 1, but it was 0 in other years. In addition, the GDP variable was included inthe model to include other variables affecting the effectiveness of monetary policy.4. ResultsThe effectiveness index of monetary policy was calculated for the sample countries beforeestimating the coefficients using the proposed approach. This research calculated theeffectiveness of monetary policy using the approach introduced by Krause and Rioja (2006).In this approach, and were calculated for the selected countries in each year. The inflationdeviation was measured by the deviation of the consumer price index. Analysis of thedescriptive statistics for the research variables demonstrated that this index average for thecountries in the period under study was 2980.43 and the median equaled 1.48. It should benoted that the lower the value of the index, the more effective the policy would be in thereduction of inflation and production fluctuations. The highest and lowest index value was873575.4 and -107.91, respectively. Jarque- Bera statistic and its significance level alsoshowed that the distribution of the variable is not normal.5. ConclusionAs shown by the results of earlier studies and the present research, the process of selection,decision-making, and performance of individuals and societies takes place within theframework of institutions. Thus, their reaction to various phenomena, including economicand monetary policies, depends on institutions. One of the major institutions is thegovernance that affects economic variables with monetary and financial policies. Therefore,the primary objective of this research was to determine the effect of governance quality onthe effectiveness of monetary policy. According to the results, improving the quality ofgovernance significantly reduced production and inflation fluctuations and enhanced theeffectiveness of monetary policy. Hence, it could be concluded that in societies withfavorable governance indicators, better and more complete implementation of laws andregulations could be expected, and formal and informal obstacles to implement economicpolicies are reduced. The results obtained from the estimation of coefficients indicated asignificant relationship between the inflation targeting policy and the increased effectivenessof monetary policy. The existence of inflation-targeting policy and its obligation make thecentral bank focus more on the main goals of monetary policy, which is to maintain the valueof the national currency and increase economic stability. Under such circumstances, thepolicy-maker can have more authority in controlling inflation and production fluctuationsrather than other secondary goals, resulting in more success in controlling inflation andproduction fluctuations.
Financial monetary economy
Eisa Abbasi; Taymoor Mohamadi; Seyed Shamsedin Hosseini
Abstract
1- INTRODUCTION
Considering that cryptocurrencies exhibit commodity characteristics such as demand shocks, high price fluctuations, etc., cryptocurrencies can be compared with the behavior of the gold and oil markets (except when there is uncertainty about the supply conditions of gold and oil. ...
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1- INTRODUCTION
Considering that cryptocurrencies exhibit commodity characteristics such as demand shocks, high price fluctuations, etc., cryptocurrencies can be compared with the behavior of the gold and oil markets (except when there is uncertainty about the supply conditions of gold and oil. There is no such uncertainty in the cryptocurrency market). Therefore, due to the commodity nature of Bitcoin, the price of oil and gold can affect the price fluctuations of cryptocurrencies. It seems that cryptocurrencies can play the role of a safe haven for commodity market investors, so the cryptocurrency market can cover the fluctuations in gold and oil prices. Commodity markets, which this study focuses on gold, oil and cryptocurrencies, have a series of characteristics. It seems that the gold market has surpassed the cryptocurrency and oil market in absorbing information, while the cryptocurrency market has higher price fluctuations than the gold and oil markets. Empirical evidence shows that Bitcoin can have a close relationship with the commodity market.Therefore, due to the commodity nature of Bitcoin, the price of oil and gold can affect the price fluctuations of cryptocurrencies.بنابراین، به دلیل ماهیت کالایی بیت کوین، قیمت نفت و طلا می تواند بر نوسانات قیمت ارزهای رمزپایه تأثیر بگذارد.
Therefore, due to the commodity nature of bitcoin, the price of oil and gold can affect the fluctuations of the price of crypto-currencies.
بنابراین، به دلیل ماهیت کالایی بیت کوین، قیمت نفت و طلا می تواند بر نوسانات قیمت ارزهای دیجیتال تأثیر بگذارد.
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2- THEORETICAL FRAMEWORK
Every person in the financial markets who has an asset portfolio tries to increase or maintain the value of his asset portfolio. The position of each asset in the portfolio has two characteristics: return (price change) and risk (price volatility). The behavior of asset portfolio owners is such that they try to increase returns and reduce risk. In this framework, they buy or sell assets in their portfolio in order not only to prevent the value of their asset portfolio from decreasing, but also to increase the value of their wealth. This behavior of the capital owners leads to the creation of connections between the global markets, including oil, gold, and cryptocurrencies, so that their yield fluctuations are connected to each other through the risk spillover effect. The asset allocation models have been investigated in a practical way for about half a century. The most well-known asset allocation model is the mean-variance strategy (modern portfolio theory), which was first developed by Markowitz (1952) to describe the process of optimal capital allocation, assuming a fixed investment opportunity set, between different asset groups over a period.
3- METHODOLOGY
In this study, the 𝑉𝐴𝑅− 𝑀𝐺𝐴𝑅𝐶𝐻 − 𝐺𝐽𝑅 – 𝐵𝐸𝐾𝐾 model has been used in order to investigate the asymmetric effects of turbulence spillover between the oil, gold and bitcoin markets because of the following advantages. First, this model has high flexibility. Second, in this model, unlike constant conditional correlation (CCC) models, the conditional correlation changes over time. In addition, it is possible to check several markets at the same time. The existence of the covariance equation makes it possible to examine the simultaneous relationship between two markets. In the BEKK model, the fluctuations of a market are affected by the fluctuations and shocks of other markets, the shocks of that market and the covariance of the markets. In other words, the effects of the markets on each other, which is reflected in the delayed covariance, have an effect on the fluctuations of the markets. These effects can be symmetrical or asymmetrical. Also, this model makes it possible to have a dynamic dependence between the fluctuations of the variables. The only disadvantage of this model is that it is not suitable for examining more than three or four markets due to the increase in parameters.
4- RESULTS & DISCUSSION
The results indicate that the contribution of the memory of turbulence in explaining the current turbulence is greater than the impact of past shocks. The impact of past impulses and the memory of the turbulences of cryptocurrencies is high on the turbulences of this market. In other words, it can be said that fluctuations in the cryptocurrency market are significantly explained by the past impulses of this market. The results show that there is one-way turbulence spillover from the Bitcoin market to the gold market and the oil market, but the opposite is not true. The results of the study also indicate leverage effects in the markets. The leverage effects of the gold market shock along with the oil and bitcoin market shocks on the gold market are significant. The leverage effects of the oil market shock along with the gold and bitcoin market shocks are also significant on the oil market and the leverage effects are also significant for the bitcoin market.
The results of the study indicate leverage effects in the markets, in other words, positive and negative shocks have different effects on price fluctuations, and bad news has a greater effect than good news on price fluctuations.
نتایج تحقیق حاکی از تأثیرات اهرمی در بازارها است، به عبارت دیگر شوک های مثبت و منفی تأثیر متفاوتی بر نوسانات قیمتی دارند و اخبار بد تأثیر بیشتری نسبت به اخبار خوب بر نوسانات قیمت دارند.
The results of the study indicate leverage effects in the markets, in other words, positive and negative shocks have different effects on price fluctuations and bad news has a greater effect on price fluctuations than good news.
نتایج تحقیق حاکی از تأثیرات اهرمی در بازارها است، به عبارت دیگر شوک های مثبت و منفی تأثیر متفاوتی بر نوسانات قیمتی دارند و اخبار بد تأثیر بیشتری بر نوسانات قیمتی نسبت به اخبار خوب دارند.
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Financial monetary economy
Elham Dehghani; Ali Raeispour Rajabali; Seied Abdolmajed Jalaee Esfandabadi
Abstract
1- INTRODUCTION
Welfare is one of the main men needs which economist and policy makers can tack appropriate planning and policies with true cognition from the effect of government policies on welfare. Generally, it is argued that the goal of monetary policies is making economic stability and ...
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1- INTRODUCTION
Welfare is one of the main men needs which economist and policy makers can tack appropriate planning and policies with true cognition from the effect of government policies on welfare. Generally, it is argued that the goal of monetary policies is making economic stability and remaining the stationary of prices. When money volume increases the level of expectation prices will increase and due to rising expectation inflation and reducing both producers and consumers welfare. Therefore, according to the negative effects of uncertainty conditions in economy on welfare of consumers and producers, assessing the effects of monetary policies on exchange rate in uncertainty conditions and its effect on welfare has undeniable importance for prevent from hazardous economic effects which carried out in this research. For this purpose, the effects of shocks due to monetary policies scenarios through increase in liquidity volume and decrease in required reserve rate (2%, 5% and 10%) on foreign exchange rate (Rial/US$) and total welfare was studied.
2- THEORETICAL FRAMEWORK
In the theoretical literature, two channels have been proposed for the effect of the exchange rate on the economy of a country; one is from a micro perspective (influence on economic agents, i.e. consumers, firms, investors, and the government) and the other is at the macro level. Many researchers have argued that households and firms are negatively affected by exchange rate fluctuations through direct and indirect channels. The direct influence of the exchange rate fluctuation is through the change in the price of imported consumer goods and as a result the change in the consumer price index, and its indirect effect is through the national monetary value and as a result the change in the price of intermediate goods and imported inputs, which leads to increase the cost of production. It is obvious that the uncertainty caused by exchange rate fluctuations has a negative effect on investment decisions, and the unreliability of economic conditions increases the severity of this effect. The direct influence channel is based on the assumption that people don’t desire with the fluctuation of the exchange rate, because it causes fluctuations in their consumption, employment and welfare. Its indirect effect is that firms try to cover future risks caused by exchange rate fluctuations by setting higher prices as a risk premium. Therefore, the price of goods and services increases. It is likely that the demand will be lower and the producers will hire fewer workers and as a result the economic welfare will decrease. This point of view is very common in the literature, and most economists do not consider this conclusion unreasonable that exchange rate fluctuations are costly for economic welfare.
3- METHODOLOGY
In order to meet the research goals the required data was gathered from Social Accounting Matrix (SAM) of Parliament Research Center of Iran in the year 2011 and input-output table of central bank of Iran (CBI) in the year 2016. On the other hand, many researches about the effects of monetary policies on economic variables have been carried out by using static computable general equilibrium and in most advanced case with dynamic computable general equilibrium models. But dynamic computable general equilibrium models divided in two categories: interim and recursive. The interim models are based on optimum growth theorem which assumed that economic agents have the ability of complete prediction while this doesn't correct many economic circumstances, especially in developing countries. Hence many economic experts believe that recursive models are more trustable. Therefore, in this research, in order to achieve the results from gathered data the recursive dynamic computable general equilibrium (RDCGE) model and impulse response functions (IRF) through making shocks on monetary police indexes include of: increase in liquidity volume (2%, 5% and 10%) and decrease in required reserve rate (2%, 5% and 10%) were applied. In addition, for data analyzing the Matlab software were applied.
4- RESULTS & DISCUSSION
Results indicated that shocks of increase in liquidity volume equal to 2%, 5% and 10%, maximally will increase the exchange rate equal to 0.97%, 1.98% and 3.08%, respectively. Also, shocks of decrease in legal reserve rate equal to 2%, 5% and 10%, maximally will increase the exchange rate equal to 0.84%, 0.90% and 1.14%, respectively. Because shocks of increase in liquidity volume and decrease in required reserve rate due to increase in money volume, causes to reduce in value of national money in comparison with foreign exchanges and therefore the Rial value of US$ will increase in domestic. In addition, results showed that shocks of increase in liquidity volume equal to 2%, 5% and 10%, maximally will decrease the total welfare equal to 1.19%, 2.47% and 3.53%, respectively. Also, shocks of decrease in required reserve rate equal to 2%, 5% and 10%, maximally will decrease the total welfare equal to 0.73%, 1.64% and 2.81%, respectively. Because shocks of increase in liquidity volume and decrease in required reserve rate due to increase in money volume, causes to reduce in value and power purchase of national money and consequently increase in inflation rate and decrease in total welfare.
5- CONCLUSIONS & SUGGESTIONS
It is concluded that the studies indexes of monetary policies (increase in liquidity volume and decrease in required reserve rate) will increase the foreign exchange rate (Rial/US$) and decrease the total welfare. Indeed, between studied shocks, shock of increase in liquidity volume has more effect on exchange rate and total welfare in comparison with shock of decrease in required reserve rate. Therefore in condition of uncertainty in exchange rate which economic agents transfer their assets to parallel markets especially foreign exchange market and cause to further increase in foreign exchange rate and consequently increase in inflation rate and decrease in total welfare, it is recommended that central bank take a restrictive monetary policy such as increase in bank interest rate because this policy while increase in investment cost, can almost prevent from speculative activities and transferring assets to exchange rate market and exacerbate the exchange rate fluctuations and finally decrease in total welfare.
Financial monetary economy
Mehdi Kholousi Sadegh; Parviz Davoodi; Mohammadreza Sezavar
Abstract
1- INTRODUCTION
Achieving macroeconomic stability is one of the main issues of policymakers in developed and developing economies, especially in Iran. In order to create stability in the economy, one of the important and efficient tools are the monetary policies that are used in direct and indirect ...
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1- INTRODUCTION
Achieving macroeconomic stability is one of the main issues of policymakers in developed and developing economies, especially in Iran. In order to create stability in the economy, one of the important and efficient tools are the monetary policies that are used in direct and indirect ways by the central bank. Open market operation as an indirect tool of monetary policy is done in most advanced countries that have structured secondary markets related to government bonds through the entry and exit of the central bank in this market. The preparations for the operation of the open market in Iran's economy have been prepared since 2017 and it has been implemented since the beginning of 2019. In the market operations of the Central Bank of the Islamic Republic of Iran, it can buy and sell certain securities, and other banks in Iran can also buy and sell these securities in cooperation with the Central Bank. Considering that the main tool of open market operations is the interest rate, it can be stated that the main objectives of the banking open market operations are the management of the short-term interest rates of the interbank markets in order to balance inflation. Of course, it should be noted that the economic conditions in Iran are different from other countries, because Iran has faced all kinds of economic and non-economic sanctions by Western countries, and it is necessary to consider this influential variable as a quantitative index and measure its effect in the model. Therefore, it is necessary to see the effectiveness of the mentioned operations in the conditions of sanctions. On the other hand, in spite of the extensive exploration regarding the issue of the effectiveness of open market operations, no study with this title has been carried out in a quantitative manner. Therefore, in this paper, the effect of open market operations on variables such as inflation, gross domestic product, exchange rate and interest rate during the period of 1392 to 1400 with seasonal frequency is investigated with the Eviuse software and by using the ARDLmodel.
2- THEORETICAL FRAMEWORK
In the implementation of monetary policy, the central bank can directly use its regulatory power or indirectly influence the conditions of the money market as a high-powered money issuer (bill and currency in circulation and deposits with the central bank). Accordingly, two types of monetary policy tools can be distinguished, which are called direct (not relying on market conditions) and indirect (based on market conditions) monetary policy tools.
3- METHODOLOGY
In order to investigate the effect of open market operations on four key macroeconomic variables, it is necessary to specify four separate equations and estimate each one separately by using the ARDL method. Consideration that the data is seasonal, it is necessary to check the reliability of the variables and the sum of the equations in order to examine the long-term relationship and the convergence of the variables towards the equilibrium value.
4- RESULTS & DISCUSSION
The important results obtained in this research is that the sign of the open market operation coefficient is contrary to economic theories, which indicates the inefficiency of the open market operation under sanctions in Iran, and these results are completely consistent with the official evidence and statistics of the relevant centers.
5- CONCLUSIONS & SUGGESTIONS
In the current situation where Iran's economy is suffering from stagnation and government budget deficit, it seems that open market operation has found the function of financing for the government and has no effect on controlling the interest rate and consequently the inflation rate. In fact, the government issued bonds without consideration and from the very beginning it has disrupted and rendered useless the operation of the open market operation tool as a tool of the new monetary policy procedure in line with inflation targeting. On the other hand, the creation of open market operations and the issuance of bonds will cause global fluctuations or external pressures to be transferred into the country in the form of clear economic effects and create another vulnerable point against sanctions in Iran's economy. In such a way that by imposing severe sanctions and even by playing with the psychological atmosphere, the price of government bonds in the market will change and fall, which can cause the discrediting of government bonds and a blow to the financing of government activities. Therefore, it is suggested to consider a sustainable and long-term solution to the government's revenue generation, which includes tax revenues.
Financial monetary economy
Farhad Sharifi Bagha; Jafar Haghighat; Zahra Karimi Takanlou
Abstract
1- INTRODUCTIONMonetary policy, as one of the most important economic tools that affects various economic variables through different channels and with different speed and intensity, has always been the attention of the responsible authorities of countries, especially developing countries like ...
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1- INTRODUCTIONMonetary policy, as one of the most important economic tools that affects various economic variables through different channels and with different speed and intensity, has always been the attention of the responsible authorities of countries, especially developing countries like Iran. On the other hand, banks, as financial and credit institutions that have a special place in the country's economy, play a decisive role in the circulation of money and society's wealth. Therefore, examining the impact of monetary policy shocks on the health of Iran's banking system, which is done through the exchange rate channel, is particularly important and is the main goal of this research. Therefore, by using 96 variables of seasonal time series data affecting the bank's profitability index, which is one of the most important indicators of measuring and judging the health of the banking system during the period of 1401:4-1378:1 and using the experimental model of the factor- Added (FAVAR), we investigate the effect of monetary policy through the exchange rate channel on the health of the banking system in Iran. The results show the direct effect of monetary policy through the exchange rate channel on the growth rate of bank network deposits and consequently the power to grant facilities, the amount of bank operating income and the growth rate of bank claims, which from this point of view is one of the most important indicators of the health of the system. A bank that has a profitability index has a negative and significant effect. On the other hand, the effect of monetary policy shocks through the exchange rate channel on the amount of deposit attraction (current, short-term, long-term Rial and foreign currency deposits) and the amount of power to grant facilities and the bank's operating income (income from granting facilities, income from of foreign exchange) is negative and significant and has a positive and significant effect on the amount of claims in the bank.2- THEORETICAL FRAMEWORKAnzwaini et al. (2012) conducted a study aimed at the impact of monetary policy shocks on commodity prices. Global monetary conditions are often cited as a driver of commodity prices. This paper examines the empirical relationship between US monetary policy and commodity prices using a standard VAR system, which is commonly used in analyzing the effects of monetary policy shocks.Jordo et al. (2019) conducted a study with the aim of whether SVARs identify unconventional monetary policy shocks? they did. We show that the used identification schemes have not been able to recover real unconventional monetary policy shocks in the Eurozone. In their identification schemes, information on the size of the central bank's balance sheet is key to distinguishing monetary policy shocks from other shocks that reduce financial market stress.Niazi Mohseni et al. (2019) conducted a study with the aim of investigating the effect of monetary policy shocks and oil revenues on inflation and economic growth in Iran. In this study, the data of the explained variables were used for the period of 1357 to 1397. Data analysis was done using STATA software. The results of this study showed that the increase in the bank interest rate has reduced the economic growth rate for at least two years after the application of the shock, and after that the effect of the shock tends to zero.Asefi et al. (2021) conducted a study on the effect of monetary policy through the asset price channel on financial development. In this study, using seasonal time series data of 110 economic variables in the period of 1370-1390 and self-explanatory model A generalized factor (FAVAR), the impact of monetary policies has been evaluated through the channel of housing and stock prices. The results of the impulse response functions indicate that the housing price channel has increased production in the medium and long term, but it has also had significant inflationary effects in the short and medium term. 3- METHODOLOGYFAVAR model introduced by Bernanke et al. (2005) is a combination of VAR model and factor analysis model. Composite dynamics (Yt, Ft) should be assumed as equation 1.According to the statistical limitations in Iran, the time period investigated in this data research will be the years 2012-2021 and the research variables include three categories:Table 1: Introduction of Xt vector variables, Yt vector exogenous variables and F vector hidden factorsBrief description of the variable Brief description of the variable Rial long term depositLDRLong-term currency depositLDFRial short term depositSDRShort term currency depositSDFriyal current depositsDDRCurrency current depositsDDFLendingloanClaims of non-governmental entitiesDIGovernment claims to the bankDigexchange rateEXCHClaims of other banks and financial institutions to the bankDibIncome from granting facilitiesInlIncome from currency exchangeBcOther variables as hidden factorsبردار The equation can be written as follows using model variables: 4- RESULTS & DISCUSSIONThe results obtained from the findings show that the monetary policy through the exchange rate channel has led to a direct effect on the deposits of the banking network and as a result the power to grant facilities and the amount of non-current bank claims which as a result It has an impact on one of the most important indicators of the health of the banking system, which is the profitability index, and this impact is negative and significant. Also, the effect of monetary policy shocks through the exchange rate channel on the amount of deposit attraction (current, short-term, long-term Rial and foreign currency deposits) and the amount of power to grant facilities and the bank's operating income (income from granting facilities, income from of foreign exchange) is negative and significant and has a positive and significant effect on the number of claims in the bank. 5- CONCLUSIONS & SUGGESTIONSConsidering the importance of the banking sector, in this study, using the FAVAR model, the impact of monetary policy shocks through the exchange rate channel on the health of the banking system of Iran during the years 2012-2021 was investigated.At the beginning, the unit root test was used to measure the significance of the variables using Stata software, and all the variables were at the significance level.In the following, with the help of Schwarz-Baysin, Akaik and Hanan-Quinn criteria, as well as the maximum likelihood statistic, the optimal interval is determined, and since these criteria do not yield the same results, the AIC criterion is used to determine the optimal interval length. and the obtained optimal interval length is specified as one. According to the obtained results, using the FAVAR model is very suitable for measuring the relationships between variables. The results of the model estimation results show that the monetary policy through the exchange rate channel has led to a direct effect on the deposits of the banking network and consequently the power to grant facilities and the amount of non-current bank claims, which is one of the most important the health indicators of the banking system, which is the profitability index, are effective. For this reason, fluctuations caused by monetary policy shocks in the exchange rate, as one of the most important factors affecting the health of the banking system, will have a negative and significant impact.Also, the effect of monetary policy shocks through the exchange rate channel on the amount of deposit attraction (current, short-term, long-term Rial and foreign currency deposits) and the amount of power to grant facilities and the bank's operating income (income from granting facilities, income from of foreign exchange) is negative and significant and has a positive and significant effect on the number of claims in the bank
Financial monetary economy
Niloofar Afkhami Rad; Taghi Ebrahimi Salari; Mehdi Behnameh; Mohammad Javad Gorjipour
Abstract
1- INTRODUCTION
The enabling factor for entering the process of globalization is the creation of a competitive enviroment. The goal is to achieve competitive power through growth, development, and improvement in the quality of life. Competitiveness is the foundation for the economic growth of ...
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1- INTRODUCTION
The enabling factor for entering the process of globalization is the creation of a competitive enviroment. The goal is to achieve competitive power through growth, development, and improvement in the quality of life. Competitiveness is the foundation for the economic growth of countries worldwide, and the real exchange rate is a good indicator for examination of a country's competitiveness in global markets. It is a variable through which we can assess the relative price of traded and non-traded goods. If there are no changes in the relative prices of other countries in the world and the real exchange rate decreases, it indicates a weakening of the international competitiveness of domestically produced goods. High fluctuations and lack of stability in real exchange rates can create an unstable environment for international trade and, as a result, reduce trade. Given the significance of the real exchange rate in influencing other macroeconomic variables and creating an uncertain environment, having knowledge of the future changes in the real exchange rate can play a crucial role in assisting monetary authorities to increase employment levels and stabilize prices.
Since many microeconomic and macroeconomic variables are influenced by the exchange rate, a proper understanding of the linear or nonlinear behavior of the exchange rate can help policymakers, firms, and traders make accurate decisions in order to effectuate desired changes.
2- THEORETICAL FRAMEWORK
The relationship between the national currency and the value of the national currency against foreign currencies is called the exchange rate. In international banking, the term "currency" refers to foreign money, sometimes including the adjective "foreign" to distinguish it from the domestic or local currency of a country. Currency is not limited to banknotes issued by central banks. It includes documents such as checks, drafts, and promissory notes that are used for international payments.
Due to resource allocation based on relative prices in the free market, efficient resource allocation occurs when relative prices are properly adjusted and serve as an indicator of the real value of resources. The exchange rate is one of the most important prices, and deviations from equilibrium can disrupt the prices of other goods and services. Generally, exchange rates are divided into several categories: 1) Nominal exchange rate, 2) Real exchange rate, 3) Effective nominal exchange rate. The nominal exchange rate is the price of one unit of a currency in terms of another currency on a specific day and at a specific time. The mention of a specific time is necessary because the exchange rate may change during different hours of the day. It is common to express the price of one unit of foreign currency in terms of domestic currency in exchange rate calculations.
Changes in the real exchange rate have a significant impact on the balance of payments and the international competitiveness of a country. Economists agree that an inappropriate level of stability for the real exchange rate leads to a decrease in national welfare. Thus, the instability of the real exchange rate from its equilibrium level leads to severe imbalances in the economy.
3- METHODOLOGY
To investigate the nonlinear behavior of the real exchange rate in Iran and in order to examine the nonlinear behavior of the real exchange rate in Iranian economy during the years 2004:04- 2018:02 two models have been applied: Self-Exciting Threshold Autoregressive (SETAR) model and Logistic Smooth Transition Autoregressive (LSTAR) model.
4- RESULTS & DISCUSSION
The possibility of threshold behavior in the real exchange rate has been confirmed by Broock, Dechert, and Scheinkman (1987) and Hansen (1999) test. Subsequently, the threshold values for the growth of the real exchange rate were calculated to be 3.84% in the first model (SETAR) and 5% in the second model (LSTAR).
In the first model, when the growth rate of the real exchange rate is below 3.84%, the growth rate of real exchange rate is minimal and classified as a regime with low growth. If the growth rate of the real exchange rate exceeds the threshold value (3.84%), its stability increases. In other words, when the growth rate of the real exchange rate is severe in Iran's economy, it is expected to be stable.
In the second model, values less than 5% are classified as a regime with low growth, while values greater than 5% are classified as a regime with high growth. The estimated coefficients for different orders in the two regimes indicate that if the growth rate of the real exchange rate is greater than 5%, this variable will exhibit stable behavior. However, at values below the threshold, due to the insignificance of the coefficients, this property will not be applicable.
5- CONCLUSIONS & SUGGESTIONS
The results demonstrated the possibility of nonlinear behavior in the growth rate of the real exchange rate. After calculating the optimal order for AR and considering other econometric requirements (Hansen test), two models, namely SETAR and LSTAR, were estimated. The threshold value was calculated to be 3.84% for the first model and 5% for the second model. In both models, it was observed that as long as the growth rate of the real exchange rate remains in a severe regime, it exhibits significant stability and is positively influenced by its past values.
Financial monetary economy
Sayed Abolfazl Vaziri; Abbas Yazdani; Mahdi Sadeghi
Abstract
1- INTRODUCTION
Compulsory loan and its macroeconomic effects, especially its effect on inflation, have always been discussed by economists in Iran. In the current research, the effect of credit compulsory loan on inflation has been evaluated. In order to estimate the model we used data from ...
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1- INTRODUCTION
Compulsory loan and its macroeconomic effects, especially its effect on inflation, have always been discussed by economists in Iran. In the current research, the effect of credit compulsory loan on inflation has been evaluated. In order to estimate the model we used data from 1990-2018. The data have been measured by using vector autoregression (VAR) method. According to the results of the research, it is suggested to replace the policy of granting compulsory loan with other existing policies such as product coupon and purchase remittance in the field of supporting weak households and value chain financing to increasing supply.
2- THEORETICAL FRAMEWORK
Compulsory loan is a loan that is imposed on the banking system according to the notes of the budget laws and other laws. In other words, banks are responsible for granting assigned loans based on the approvals of authorities outside the banking system. These loans are one of the government's policies to support the vulnerable sections of the society. Every year, in note 16 of the country's budget, a decision is made by the government and the parliament in relation to the debt relief.
3- METHODOLOGY
In this research, the data is time series. To analyze the data we choose from various models of the vector autoregression (VAR), which is actually an unrestricted method in econometrics. the vector of variables is a function of its own intervals and other endogenous variables. The vector autoregression method has the following feature: all variables in this model are endogenous, the results of the model in many cases are better than the results of complex models; It is like simultaneous equations, estimation of the model is simple.
4- RESULTS & DISCUSSION
According to the tests, it has observed that a one percent increase in the compulsory loan will increase the consumer price index by 0.4 percent; one percent increase in the nominal interest rate also leads to a 1.25% increase in the consumer price index. Also, the effect of the instant shock of the loan facility rate on the consumer price index and the nominal interest rate is not significant. Next, in the analysis of variance method, the contribution of impulses entered on the model variables was evaluated and it was found that in the 5 first periods (of 10 periods) the largest prediction error of the consumer price index rate variable is explained by the LCPI variable. From the 6th period to the 8th period, however, the explanatory contribution of the nominal interest rate is higher. In the 9th and 10th periods, the compulsory loan rate has the largest contribution in explanation the variable prediction error of the consumer price index.
5- CONCLUSIONS & SUGGESTIONS
The budgeting system directly and indirectly affects monetary policies. One of the channels of this influence can be followed in the budget notes. Every year, in some laws of the country, especially in the annual budget laws, the banking system is burdened with tasks, and in some of these cases, due to the preferential rate of these loans, or in other cases, due to the high default of these loans, the country's banking system has suffered imbalance. In this regard, increasing of the monetary base was not only through the growth of banks' balance sheets. Rather, the financial dominance of the government and the impact of financial rulings on the balance sheet of the central bank in the form of borrowing from the central bank, buying government bonds has also caused the expansion of the government's debt and the net foreign assets of the central bank, as well as the monetary base.
Financial monetary economy
Farzaneh Sadeghi goorabi; Saleh Ghavidel; Mirhosein Moosavi
Abstract
1- INTRODUCTION
Choosing the appropriate method of financing and transferring funds to manage business risks is a primary concern for international traders. Therefore, the factors that influence payment method and tool selection in international trade have long been a topic of interest to financial ...
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1- INTRODUCTION
Choosing the appropriate method of financing and transferring funds to manage business risks is a primary concern for international traders. Therefore, the factors that influence payment method and tool selection in international trade have long been a topic of interest to financial institutions and researchers. The level of commercial risk associated with a country is one of the most significant factors in the theoretical foundations of this field. The level of rule of law in a country is considered a guarantee for contract enforcement and is one of the indicators used to measure commercial risk. Theoretical challenges among economists, varying results from empirical studies on the relationship between the commercial risk of countries and the volume of opening of letter of credit, as one of the most effective payment tools in international trade, and a lack of research on the nonlinear relationship between these two variables in Iran, make it necessary to conduct this study.
2- THEORETICAL FRAMEWORK
Based on theoretical foundations, the level of commercial risk of the countries involved in a transaction significantly impacts the choice of payment methods used in international trade. Many studies have shown a significant relationship between the volume of opening of letter of credit and commercial risk. Researchers have shown that traders take into account the commercial risk of the other country when choosing payment methods in international trade. Also, some studies, using regression analysis, have evaluated the relationship between the two variables of the volume of transactions through the opening of letters of credit and the level of rule of law in countries in an inverted U shape. These results show that the high rate of use of this tool is in trade between countries that have a similar level of trade risk.
3- METHODOLOGY
The current study is a combination of causal and exploratory research, conducted with a practical aim. The research focuses on analyzing the relationships between variables using descriptive-correlational methods, and the statistical population consists of Iran's imports from 79 trading partner countries between 2014 - 2017. The relationship between business risk and the volume of opening of letter of credit is modeled by using the Smooth Transition Autoregressive Logistic (LSTAR) method, which allows for a non-linear relationship between the two variables. If the relationship between the two variables changes over time, it is said that a regime change has occurred, and the threshold level indicates the point of regime change. This pattern suggests that the existence of different values of variables in different regions, or other words, the existence of different regimes, leads to different economic relationships between variables. In the first step, sudden change models assuming a finite number of different regimes were considered. Then, the standard STAR model was introduced with a logistic transfer function, which is a type of sudden change model, due to its smoother and more flexible transitions between regimes.
4- RESULTS & DISCUSSION
According to the results of our study, a direct and nonlinear relationship between the volume of opening of letter of credit and the rule of law in Iran's foreign trade during the period under investigation has been confirmed. In the linear section of the model, the rule of law index of the opposing country had a positive effect on the volume of opening of letter of credit from the total imports of Iran. However, in the nonlinear section of the model, this index had a negative effect. Additionally, the results show that the rule of law had a significant and nonlinear negative effect in the previous period, while in the current period, it had a significant and linear positive effect on the volume of opening of letter of credit. Therefore, the hypothesis of the existence of a nonlinear relationship between the volume of opening of letter of credit and the rule of law in Iran's foreign trade has been confirmed.
5- CONCLUSIONS & SUGGESTIONS
The results of both the linear and non-linear sections of hypothesis indicate a significant correlation between the rule of law index of Iran's trading partners and the volume of opened letter of credit from Iran's total import volume. This finding is consistent with the theoretical foundations presented in the study, as well as the views expressed, which suggest a significant relationship between these two variables. Moreover, the results of hypothesis two demonstrate a non-linear relationship between these two variables in Iran's foreign trade during the years 2014-2017. It can be concluded that an increase in the rule of law index of Iran's exporting countries initially resulted in an increase in the volume of opening of letter of credit. However, in the long run, the volume of opening of letter of credit decreased, and other methods of transferring funds replaced this financial instrument. This finding also confirms the hypothesis of Niepman and Eisenlohr regarding Iran's economy. It should be noted that this study only used data on the volume of opened letter of credit resulting from Iran's imports, which was accessible through the IT office of the Islamic Republic of Iran Customs. Data on credit document opening resulting from exports by Iranian traders, which was carried out by foreign importers in their own country, was not available and therefore not considered. For future research, it is recommended to re-estimate the model of this study while taking into account the statistics of opening of letter of credit in Iran's export sector, after the possibility of using the SWIFT system for Iranian banks and accessing its data.
Financial monetary economy
saeed rahimi; parvaneh salatin; Mahmoud Mahmoudzadeh; Masoud Sufi Majidpour
Abstract
In this study, the effect of banks' performance on economic convergence in the provinces in the period of 2018-2019 has been investigated using spatial econometrics. The results of the estimation of the models showed that the ratio of facilities to bank deposits as an indicator of banking performance ...
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In this study, the effect of banks' performance on economic convergence in the provinces in the period of 2018-2019 has been investigated using spatial econometrics. The results of the estimation of the models showed that the ratio of facilities to bank deposits as an indicator of banking performance and monetary indiscipline have a negative and significant effect on economic convergence in the provinces. The speed of convergence of conditional beta estimated by considering bank indices is higher than absolute convergence.Also, real capital stock, human capital and Internet penetration rate have a positive and significant effect and the rate of economic participation has a negative and significant effect on economic convergence. Investigating the effects of spillovers in 2018 showed that the spillover effect of banking performance on neighboring provinces was positive. Also, with the increase in the distance between the provinces, the spillover effect has decreased, in fact, the spillover effects on the neighboring provinces are more than the provinces that are located at a further distance.
Financial monetary economy
Mohammadtaher Ahmadishadmehri; fariba osmani; mahdi cheshomi
Abstract
Today, one of the problems of developing countries is increasing inflation. On the other hand, the political situation of many developing countries is also unstable. In addition, with the emergence and growth of new technologies and complex products, the effects and how the change of new structures affects ...
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Today, one of the problems of developing countries is increasing inflation. On the other hand, the political situation of many developing countries is also unstable. In addition, with the emergence and growth of new technologies and complex products, the effects and how the change of new structures affects the inflation rate are unclear.The aim of this study is to investigate the effect of economic complexity and political stability on the inflation in a panel of 15 developing countries in Asia during the years 1997-2018 using panel-quantile regression. In addition, the variables of GDP per capita, liquidity and exchange rate were considered as the explanatory variables.The results of quantile regression showed that the increase in liquidity and exchange rate increases inflation. As the economic complexity increases, the inflation rate decreases in all quantiles. In addition, increasing political stability helps to improve economic conditions and reduce inflation. Therefore, it can be concluded that inflation in developing countries is not only a monetary phenomenon and political and economic factors also affect it. In addition, the results of this study show that there is no significant relationship between GDP per capita and inflation, which indicates the verticality of the Phillips curve in the group of developing countries.
Financial monetary economy
milad asadpour; ALIREZA Rezaee
Abstract
The economy and the forecasting of its indicators is one of the main and influential elements in the life of every person and can be the basis for the superiority of individuals and governments over others, as a result, the forecasting of indicators is always one of the main challenges and concerns of ...
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The economy and the forecasting of its indicators is one of the main and influential elements in the life of every person and can be the basis for the superiority of individuals and governments over others, as a result, the forecasting of indicators is always one of the main challenges and concerns of economists and investors. On the other hand, with the emergence of cryptocurrencies and the increase in their price value, a lot of investment has been made in this field, so finding methods to predict the price of cryptocurrencies in the future is very important. In this article, a method for predicting the price of Bitcoin using artificial intelligence algorithms is presented. For this purpose, the characteristics affecting the future price of bitcoin were identified and categorized and standardized in two separate data sets including price data and structural data of the bitcoin network, then a new structure consisting of three feedforward and feedback neural networks was designed, the first and second network including the GRU layer. which predict prices in parallel and separately from each other. Next, the output of each of these networks is combined with each other by a neural network, and finally, values are obtained as price predictions for the coming days. The results of the research and error calculation show that using the last 15 or 20 days is the best interval for predicting the future price of Bitcoin, which has an accuracy of 97.36% and 96.76%, which shows the high accuracy and efficiency of this method. Also, due to the correct selection of the input features, the computational volume of this research has been significantly reduced.
Financial monetary economy
hashem manzarzadeh tamam; Mohammad Reza Abbaszadeh; reza hesarzadeh; Seyed Saeed Malek Sadati
Abstract
With the tightening of sanctions and the unilateral withdrawal of the United States from the JCPOA in 2017, the maximum pressure on Iran caused great damage to Iran's economy. It is predicted that in the new period after the JCPOA, these sanctions will have many destructive effects on the performance ...
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With the tightening of sanctions and the unilateral withdrawal of the United States from the JCPOA in 2017, the maximum pressure on Iran caused great damage to Iran's economy. It is predicted that in the new period after the JCPOA, these sanctions will have many destructive effects on the performance indicators of selected industries of the Tehran Stock Exchange. Based on this, the purpose of this research is to investigate the effect of some macroeconomic variables. During the sanctions periods (before and after the JCPOA), it is based on the performance indicators of the companies admitted to the Tehran Stock Exchange (selected industries: automobile, chemical, medicine and steel).In terms of the purpose of this research, it is considered as applied research, and the current research is of the post-event type, that is, it is based on the analysis of past information (financial statements of companies). Also, the method of this research is correlational in nature and content. The time period of the research includes 11 consecutive years from 1389 to 1399.The results of the research showed that sanctions had a moderating role on the relationship between exchange rate fluctuations and added value of companies. Sanctions in all selected industries, except the automobile industry, have had a moderating role on the relationship between the volume of foreign investment and the investment activities of companies. Sanctions in all selected industries, except the automobile industry, have had a moderating role on the relationship between the price index of products and the profitability of companies. Sanctions in the whole sample and in the chemical industry, on the relationship between the import of intermediate goods and capital and operational activities of companies have a moderating role.Keywords: sanctions, exchange rate fluctuations, volume of foreign investment, performance indicators of companies.
Financial monetary economy
samira motaghi; samane talei; ramezan gholami
Abstract
According to Fisher's theory, an increase in expected inflation results in a unit increase in nominal interest rates, and the real interest rate, which plays a key role in shaping investment and savings behavior, remains constant, and this factor, although inflation Leads to the neutralization of monetary ...
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According to Fisher's theory, an increase in expected inflation results in a unit increase in nominal interest rates, and the real interest rate, which plays a key role in shaping investment and savings behavior, remains constant, and this factor, although inflation Leads to the neutralization of monetary policy;On the other hand, based on the theory of quantity of money and the direct relationship between the velocity of money and the general level of prices, as well as the direct effect of the velocity of money on interest rates, raising interest rates is expected to increase inflation.This effect of interest rates on the inflation index (according to some economists) is not only related to inflation and affects other macroeconomic variables, but the important issue is the type, manner and amount of this effect in the short term and It is a long-term study in the present study using VAR and VECM methods and in the period of 1360 to 1399.The results of the study show the confirmation of Fisher's theory in the Iranian economy both in the short and long term, and suggest that there is a positive and significant relationship between the interest rate variable and the inflation index in the Iranian economy.In addition, variable interest rate fluctuations overshadow other macroeconomic indicators, as this relationship is inverse for the economic growth index and physical investment and direct for the inflation rate index.
