Iranian Economic Review
Volume:17 Issue: 35, Autumn 2013

There have been two broad theories of inflation, namely the demand pull theory of inflation (that is nowadays mainly the monetary theory of inflation) and the cost push theory of inflation. The mainstream macroeconomics views inflation as a monetary phenomenon in the long run. Iran has experienced double digit rates of inflation for about four decades. Our main aim is an explanation for the long run movements in the rate of inflation. We have used the raw data and the filtered data on the rate of inflation and the growth rate of money supply to show that there is a long run relationship. Also, we have used cointegration VAR method to show that there is a long run relationship between the price level and the money supply but not between the price level and the cost push factors. The empirical findings are not inconsistent with the monetary theory of inflation in Iran.

In the beginning of 2011, Islamic Republic of Iran underwent a Scheme called “Subsidies Targeting”. This scheme meant to replace subsidies on goods and services especially energy, which had kept prices low for decades, with a monthly refund to every resident as compensation plan. Considering the magnitude of price change up to ten times and the importance role of Energy carriers in production and households’ consumption, it would be necessary to analyze the inflationary effect of that Scheme. Therefore we developed a RMSM-X model including six sectors and added some behavioral links among economic variables to forecast Inflation and Growth rates for a four-year period. Unlike other studies done about this subject in Iran, RMSM-X ensures economic consistency among all sectors of an economy. The RMSM-X projection results suggest that the Scheme increases inflation rate by 24% and reduces the growth rate by 5%. Even though inflation rate levels of the year after running the Scheme but it will not fall back to base scenario by 2015.

In this paper, we analyze the effects of oil revenue shocks on different sectors of Iranian economy. We use quarterly data of Iranian economy from 1988:2 to 2011:1 to analyze a time varying parameter VAR model with Bayesian method. The results show that in late 1980s and early 1990s, the positive effects of oil revenue were mostly emerged in industrial and oil sectors, having almost no effect on services sector and negative effect on agricultural sector. In 2000s, oil revenue is relatively less effective in industrial sector, while more effective in agricultural and services sectors.

In this paper, we tested the catching up hypothesis toward USA using Becker et al. (2006) flexible Fourier KPSS stationary test over the period 1960-2009. The mentioned test could control for unknown number and form of structural breaks using a selected frequency component of a Fourier function. Our results show almost poor countries stay poor and almost rich countries stay rich. South Korea, Hong Kong, Singapore, Taiwan, India, Malaysia and China could escape lag deadlock and the countries like Central African Republic, Congo, Cote d`Ivoire, the Gambia, Guinea, Haiti, Kenya, Rwanda, and Senegal diverged from USA and moved into poverty trap.

This paper focuses on Indo-Iranian merchandise trade for a period of 30 years from1980-81 to 2009-10. Study is based on econometric modeling comprising 3 versions of RWM model and alternative forms and specification of regression functions. RWM model(s) evaluates stationary nature of time series data relating to GNP, exports, Imports and total merchandise Indo-Iranian trade. Dickey-Fuller unit root test and Engle-Granger test of co-integration on residuals derived from distributed lag model with partial adjustment hypothesis are used. Results of distributed lag model with partial adjustment hypothesis emerge empirically and theoretically valid. Indo-Iranian trade is found to be affected both by contemporary and lagged values of variables included in the model. But adjustment of actual to desired change in specific trade variables is spread over several periods. Current values of merchandise trade are the slowest to adjust to its desired value; but adjustment of Indian exports to Iran is instantaneous while adjustment of imports requires 2-3 periods. These findings suggest that any contemporary political exigencies or international economic aberrations should not and will not affect the long standing indo-Iranian trade relations. Institutional arrangements and their strengths are stronger than barriers to allow aberrations to be effective.

Nowadays one of the most important issues in our economy, both from economic and political view is the link between monetary policy and the business cycle fluctuations. Amongst the shocks related to supply side, the shock of oil price is the important factor that has affected the world economy since 1970s. This paper examines the effects of monetary policy and oil price shocks on the business cycle fluctuations by applying the factor augmented vector autoregressive approach, Bernanke (2005) … to compare the results with VAR models by using Iran quarterly data for the period 1988:Q2 to 2011:Q3, the FAVAR models explain the effects of monetary policy which are consistent with theory better than VAR models. The results demonstrate a small but significant impact of monetary policy on business cycle fluctuations.

Electricity cannot be stored and needs huge amount of capital so producers and consumers pay special attention to predict electricity consumption. Besides, time series data of the electricity market are chaotic and complicated. Nonlinear methods such as Neural Networks have shown better performance for predicting such kind of data. We also need to analyze other variables affecting electricity consumption so as to estimate their quantitative effects. This paper presents a new approach for forecasting: a combined method of Neural Networks (ANN) and econometrics methods which can also explain the effect of raising the electricity prices on consumption after Subsidies Reform Plan. Data is from 1988-2008, and the method is compared with Neural Network and ARIMA based on the RMSE performance function that shows the advantage of the combinned approach. The provident prediction is done for 2009- 2014 and indicated that after decreasing subsidy, electricity consumption would increase slightly until 2014.

This Paper considers the relationship between economics factors and national security. While considering a broad number of issue areas, the principal theme of the course is the way in which economic factors (as immigration) fundamentally influence the national security ofregion, and the way in which those factors shape and constrain the strategies chosen to pursue that security. South-South migration flows outnumber the flows between South and North, and a series of developing countries have, over time, become net immigration countries. This phenomenon implies new challenges, in particular at the social level, for both the countries of origin and destination, and requires a different approach in the way we think about the governance of migration flows. In this paper, we try to examine immigration effect on Persian Gulf region’s security. The results show that immigration decrease regional security.