Iranian Economic Review
Volume:11 Issue: 16, Spring 2006

In this paper, based on error correction model by using panel data, an empirical analysis of demand for international reserves for 16 Islamic countries is investigated.Besides addressing conventional issues, the model explicitly incorporates the impact of expected export revenues and the impact of the exchange rate system on reserve demand.The results reveal that, short run money market disequilibrium has not any significant effect on demand for international reserves in Islamic countries. In addition, in these countries expected export revenues have positive long run effect while exchange rate flexibility has negative effect on demand for reserveFurthermore, by using the mean-variance approach this paper presents a model for selecting an optimal reserves portfolio for the Islamic countries. The model focuses on the relationship between the composition of reserves and the impact of return and risk of holding each foreign currency.Results reveal that the currency composition of reserves have been influenced by risk and return associated with holding reserves assets denominated in different currencies such that, the share of each currency in composition of foreign reserves have a negative relationship with the risk of each currency in reserves asset.

Estimation (Forecasting) of industrial production costs is one of the most important factor affecting decisions in the highly competitive markets. Thus, accuracy of the estimation is highly desirable. Hibrid Regression Neural Network is an approach proposed in this paper to obtain better fitness in comparison with Regression Analysis and the Neural Network methods. Comparing the estimated results from Regression Analysis and Neural Networks with the Hybrid Neural-Regression method has indicated the superiority of the latter method.

In this paper, we have sought to recognize the Islamic countries eligible to participate in the early nucleus of economic integration. In other words, our main question is: by using the key international macro-economic variables, which members of OIC have the capacity to actively participate in regional integration? Or, in the words, which countries enjoy the necessary qualifications for establishing the early nucleus of an effective regional economic integration among the OIC Members? In order to answer this question, using 16 key international macro-economic and trade indices, which have a bearing on regional economic integration, have attempted to make taxonomy of OIC members and to recognize the most we suitable members for constituting the early nucleus of regional economic integration.In terms of our aggregate combined index of OIC members, our findings suggest that the United Arab Emirate, Turkey, Kuwait, Bahrain, Indonesia, Malaysia, Saudi Arabia, Iran, Egypt and Lebanon have, respectively, the highest numerical value and ranking. A look at these 10 high-ranking countries reveals that they are members of three major regional arrangements incorporated in the OIC: out of these 10 top countries, 5 countries are among the 8 members of the D-8, 4 countries are among the 6 members of the (P) GCC and 3 countries are among the 10 members of the ECO. It is noteworthy that many members of the (P) GCC and the D-8 are in a better position with respect to this index.The higher rank of these 10 countries in terms of the above index is due to their relatively higher numerical value and ranking in all three combined indices incorporated in the above index (i.e. economic welfare and development, international economics and foreign trade, and trade development). This has been also confirmed by econometric estimates, as the first two combined indices (i.e. international economics and foreign trade, and economic welfare and development) have played a much more significant role in the aggregate combined index. As a result, the improvement of the first two combined indices leads to the improvement of the aggregate combined index. So, we can conclude that those OIC members with a better position with respect to the key international macro-economic variables are the most eligible countries for establishing the early nucleus of an efficient regional economic integration.

In May 2004, ten countries joined the European Union. Most of these countries that are located in the central and eastern part of Europe have different historical background and economic structure, compared to the older EU members. Doubt, the economic consequences of the enlargement of the EU toward Eastern Europe, is one of the main interests of the researchers in recent years and it will be extended well over the first decades of the new Millennium. With the expansion of Eu, the implications of regional economic cooperation and competition for all EU members, in terms of resource allocation, the concentration of economic activities and its welfare consequences, depends upon utilization of economic resources. Effective utilization of resources in turn, rests upon realization and exploitation of comparative advantage in different arrays of economic activity. Given the fact that most of the old members of the EU have relatively a well-established, internationally competitive industrial base, with their manufacturing firms closer to the technological frontier whereas the new members are endowed with more heterogeneous natural resources and more diversified agricultural products, the potentials of agricultural trade seems to exist for the hew corners for the years to come. The main purpose of this paper is to measure the degree and the extent of comparative advantages in agricultural crop production and to compare the results for the old and new members. The Bowen comparative advantage index as well as a simple regression model will be used in this regard. This demonstration will highlight the relative strengths of the new members in exploiting their agricultural trade potential and may help to formulate effective policies for domestic production, distribution and marketing activities in the enlarged EU for further exploitation of potential agricultural commodities trade.

The re-evaluation of the scientific method at the 20th century marked the inductive method as the scientific reasoning. In the contemporary science, the falsifiability plays an important role. Particularly, the science is considered to be a collection of proposition which describe the observational realities which can be falsify throughout the empirical experiments. Economics as a contemporary science uses the falsification to falsify its own propositions through experiments.According to contemporary science, the Islamic economy on the other hand, is not categorized as sciences and does not posses scientific features. Furthermore, except for and prediction to study the human behaviour. In fact, economics comparative concepts, it presents a different methodology for the study of its propositions. In Islamic economy, there are fixed and changeable this economy to converse "what it is" to "what it ought to be" This system presents the best economic system according to human nature and divine rules and formulates the new concepts and principles. Comparative concepts of Islamic economy lack scientific qualities and explain the behavioral patterns that are based on premises.

The growth of regional trade blocks has been one of the major developments in international relations in recent years. Regional agreements vary widely but, all have the objective of reducing barriers to trade between member countries that in most cases result in increasingly trade flows and economic growth. This paper attempts to explore the results of trade integration in ECO, EU and OIC blocks. For this purpose a “Gravity Panel Data Model” is specified to test the hypothesis in which economic integration among countries can expand trade flows. Accordingly, three types of models are to employ to explain the trade integration between all ECO, OIC, EU members and their major trading partners. The empirical results show that the three regional trade arrangements create trade and increase welfare for the participants. Another result of the study demonstrates that both rich and poor countries within those RTA’s could reap the benefits of integration, even though their economic and social structures are heterogeneous and different.

The main purpose of this paper is analyses the short and long run relationship between budget deficit and trade deficit in some MENA countries. The data cover the period from 1971-2000 (and for I.R. IRAN 1959-2003).The relationship between these variables will be analyses in short and long run by using Johansen co-integration tests, ECM, and Granger causality test. The empirical evidence provides support to the view of Ricardian Equivalence in Iran (Islamic Rep.), Jordan, Kuwait, Morocco, Oman, and Tunisia. But, the empirical evidence proves the validity of Keynesian proposition (conventional view) only Egypt, Bahrain, Oman, and Turkey.

This paper examines the causal relationship between energy use and real GDP for the period 1967-2002 in Iran. The results of Phillips- Perron test indicate that the real GDP and the four categories of energy, i.e. coal, oil, gas, and hydroelectric energy are integrated of order one. Besides, the Johansen – Juselius maximum likelihood co- integration tests imply the existence of Granger causality. The VEC models that have been estimated to test the direction of Granger causality support a unidirectional causality from GDP to energy use in short run.

The purpose of this study is to concentrate on the investigation of the days-of-week effect on Tehran Stock Exchange and its comparison with other emerging markets. Using Classical Linear Regression (CLR) as well as Autoregressive Conditional Heteroskedasticity (ARCH) models it in indicated has indicated that there is significantly positive total return on Saturdays and significantly negative total return on Sundays. There is no significant return on the other days of the week. So, one may suggest that it would be reasonable to sell on Saturday and buy it on Sunday. Comparing this result with that of other emerging stock markets, it can be concluded that the days- of- week effect on returns of Tehran Stock Exchange is different from other emerging markets.

In the second half of the last century, tremendous efforts were devoted to identifying sources of economic success by a few countries and causes of failure by most. In this process a voluminous literature ranging from the neo-classical to Marxist, neo-Marxist, and dependency theories has been developed to answer the question of disparity among different countries of the north vis-à-vis those of the south. They all agree that accumulation of capital (social, human, and physical) was, is, and will remain one of the most significant problems of the third world countries -the south- for economic growth. Traditionally we have assumed that risks and profits drive investment, investment drives growth, and growth, in turn, is the driving force behind saving. More income leads to more savings. In this study, using Iranian data, a causality test has been performed to ascertain whether this sequence is true. We found it is not the case, and saving precedes investment. If so, macroeconomic policies must be directed as increasing saving to foster further investment and economic growth and not the other way around.