Financial Economics
Mahdi Jalili; Elnaz Entezar; Tahereh Akhoondzadeh Yousefi; Mohammad Sokhanvar
Abstract
1- INTRODUCTION
Undoubtedly, it is possible to achieve long-term and continuous economic growth in any country by equipping and optimally allocating investment resources in the national economy of that country, and the role of developed financial markets is necessary to achieve this goal. In fact, the ...
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1- INTRODUCTION
Undoubtedly, it is possible to achieve long-term and continuous economic growth in any country by equipping and optimally allocating investment resources in the national economy of that country, and the role of developed financial markets is necessary to achieve this goal. In fact, the role and importance of the financial system in the development process of countries is such that the difference between developed and developing economies can be found in the degree of efficiency and effectiveness of their financial system. Financial development is a category, which, according to the developments of financial markets, following the discussions of globalization and financial integration after the 70s, was taken into the attention of economists. Therefore, considering the importance of the financial development category in different countries, the study of factors affecting it has always been emphasized. Financial development is a set of factors, policies and institutions that lead to the creation of effective financial markets and financial intermediaries and provide deep and wide access to capital and financial services.
2- THEORETICAL FRAMEWORK
Many factors can influence the development process of financial markets, among which, the role of the combined index of globalization and inflation can be very important. Some economists and economic policymakers, such as Greenaway and Baltaji, believe that globalization leads to better macroeconomic performance and faster financial development in terms of financial and commercial openness, which many empirical studies support this view. International institutions such as the World Bank, the International Monetary Fund, and the Organization for Economic Cooperation and Economic Development advise member countries to believe that commercial and financial liberalization has a positive effect on financial development.
3- METHODOLOGY
In this research, the non-linear effects of globalization and inflation on the financial development index (facilities granted by the banking system) in Iran during the period 1368 to 2020 have been investigated by using the Markov switching econometric technique.
In this study, the dependent variable is financial development, and the independent variables are inflation, globalization, capital stock, and government spending.
4- RESULTS & DISCUSSION
In the first regime, the economic dimension of globalization has a positive effect on financial development, which indicates that, due to the increase in the economic dimension of globalization, the index of financial development (facilities granted by the banking system) increases. But in the second regime, the economic dimension of globalization has a negative effect on financial development, which indicates that, due to the increase in the economic dimension of globalization, the index of financial development (facilities granted by the banking system) decreases.
Inflation caused by demand pressure and monetary inflation in both regimes has a negative effect on financial development, which indicates that, due to the increase in inflation caused by demand pressure and monetary inflation, the index of financial development (facilities granted by the banking system) decreases.
Human capital in both regimes has a positive effect on financial development, which indicates that, due to the increase in human capital, the financial development index (facilities granted by the banking system) increases.
In the first regime, capital stock has a positive effect on financial development, which indicates that, due to an increase in capital stock, the index of financial development (facilities granted by the banking system) increases. But in the second regime, it has no effect on financial development. Government spending in both regimes has a negative effect on financial development, which indicates that, due to an increase in government spending, the financial development index (facilities granted by the banking system) decreases.
5- CONCLUSIONS & SUGGESTIONS
The results of the estimates indicate that the sources of inflation (inflation caused by demand pressure and monetary inflation, structural inflation, inflation caused by cost pressure and imported inflation) had a negative effect on financial development in both regimes. Regarding the dimensions of globalization (economic dimension, social dimension and political dimension), we saw a positive relationship in the first regime and a negative relationship in the second regime. In connection with the results of the control variables, the variables of capital stock and human capital in both regimes had a positive effect on banking facilities, but the effect of government spending on banking facilities in both regimes was negative. Now, according to the results, policy proposals are presented as follows:
- What can be stated with certainty is that paying attention to globalization and joining international organizations such as the World Trade Organization can help improve the performance of financial development indicators in Iran. Because Iran has a long way to go on the path of globalization and integration into it. Therefore, the economic, political, social and cultural dimensions, especially the political dimension, need a fundamental revision.
samira zareinezhad; kiomars sohaili; Shahram Fattahi
Abstract
Extended abstract
1- INTRODUCTIO
In order to have an effective monetary policy, it is necessary for the monetary authorities to have sufficient information about the effect, the channels of start the effect, the duration of the effect and the time when the effect of the monetary policy effect peaks. ...
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Extended abstract
1- INTRODUCTIO
In order to have an effective monetary policy, it is necessary for the monetary authorities to have sufficient information about the effect, the channels of start the effect, the duration of the effect and the time when the effect of the monetary policy effect peaks. Therefore, it is necessary to examine the intersection of credit channel, housing price channel, stock price channel and exchange rate channel in the nonlinear transmission mechanism of monetary policy on inflation in the Iranian economy. It has a structure in different regimes and the data of the central bank are used during the years1978-2017.
2- THEORETICAL FRAMEWORK
Monetary policy is a set of actions that the central bank (monetary authority) through monetary instruments affect many economic goals such as price stability, exit from recession, stimulation of economic growth and increasing employment. This effect of monetary policy on the set goals and improvement in macroeconomic performance will indicate the efficiency of monetary policy. Central banks, as monetary policy makers in most countries of the world, seek the effectiveness of their monetary policies and to better understand the structures governing their economic environment in order to implement appropriate and timely policies and put economic variables on the path of growth and development. In this regard, how to formulate monetary policy and use monetary instruments is of particular importance in macroeconomics.
3- METHODOLOGY
A novel feature of the Markov switching model is that the regime change mechanism in this model depends on a status variable. in other words, the recent value of the state variable just depends on the its value in previous periods. to calculate the unconditional probabilities in a model that include two regimes indicate the probability of being in each regime, we can consider the possibility of changing the parameters in different regimes, the linear VAR model transforme the MSVAR model:
4- RESULTS &DISCUSSION
The role of the exchange rate channel in transferring money to inflation is positive in both regimes, meaning that it increases inflation. Given the structure of the Iranian economy and due to the high dependence on the price of finished products of domestic production to imported capital goods, it seems that the exchange rate will play a dominant role in determinayion the fate of inflation in the Iranian economy.
The role of housing price channel in transferring money to inflation in regime one increases inflation and negative effects on monetary policy in Iran’s economy, while in regime two, housing price channel in transferring money to inflation has played the largest share in reducing inflation.
The role of corporate credit channel in transferring money to inflation in the regime has a greater share than the second regime in transferring money to inflation. As a result, in economic policies, special attention should be paid to the inflationary effects if the granted facilities.
Stock price channel, support of the stock market should be one of the main priorities of officials. Because in the Iranian economy, which is always involved in high inflation, the stock market without inflationary effects can increase investment to increase production.
5-CONCLUSIONS & SUGGESTIONS
According to our results, it is suggested that to control inflation, policymakers should pay special attention to changes in currency price. At the same time, the policymaker can reduce the dependence of the country's industry on the import of capital goods and strengthen domestic financial instruments, such as the return on bank deposits, stock exchanges, etc. To strengthen other transfer channels so that it can rely on other channels to control inflation.
