Iranian Economic Review
Volume:20 Issue: 43, Spring 2016

The study examines the growth effects of foreign direct investment on environmental quality in Nigeria between 1970 and 2013. Variables like per capita income, environmental degradation, foreign direct investment, human capital, inflation, trade openness, interest rate, and the interaction term between foreign direct investment and carbon emission were employed in the study. A long run relationship was observed among the variables and foreign direct investment and environmental degradation negatively enhanced growth individually, while the interaction variable positively enhanced economic growth. The study concludes that environmental consideration does not really matter in growth consideration in Nigeria but that carbon emission must not exceed the 67.4% threshold if the economy is to benefit from the interaction between foreign direct investment and carbon emission. Policy makers are encouraged to strike a balance between the quantity of emissions and the amount of economic growth that is suitable for the country since the decision to maintain green growth by developing countries is not an easy one to make.

In this paper we test two versions of convergence hypothesis namely deterministic or conditional convergence and stochastic or catching up hypothesis using Carrion-i-Silvestre et al. (2005) stationary test. The results show Latin and South American countries (LSA) catching up process toward the USA failed in 1980s and somewhat in 1990s. But in 2000s most of them could lie in convergence path. Dispersion of break dates show that structural breaks in LSA convergence were affected by trade policies, terms of trade shocks and also war. For example, terms of trade shocks due to volatility of primary goods prices such as sugar, copper, cotton, petroleum oil, coffee, bauxite, aluminum, and rice affected the convergence process in LSA countries.

In this paper we investigated total energy consumption and its individual forms (oil, natural gas, electricity, renewable energies and coal) relationship with real gross domestic product (GDP) in Iran. We employed Hsiao’s (1981) methodology and annual data which cover 1967-2010 for investigation. The empirical findings indicate there is bidirectional causality effect with real GDP and total energy consumption as well as its three individual forms including, oil, natural gas and electricity. Therefore we can accept feedback hypothesis about total energy consumption-GDP linkage. There is not any causality effect with other individual forms of energy such as renewable energies and coal with GDP. These results are not too surprising for Iran, because share of oil, natural gas and electricity is higher than other forms of energy.

The return of capital is fundamental to the intertemporal allocation of resources by changing the consumption behavior and capital accumulation over time. Taxation on return of capital increases the marginal product of capital, meaning that capital stock is lower than when capital is not taxed, which results decreased growth and welfare in steady state. This paper studies the impact of capital income taxation on capital stock, output and welfare in a dynamic optimization model. Theoretical and experimental results indicate that any attempt to decrease taxation on return of capital in Iran's economy, will be eventually reached to a higher capital formation, higher output and consumption per capita in the steady state. Finally, leads to higher welfare level in the steady state.

This paper, I have focused on the tax side of the fiscal policy to investigate the past and future behavior of fiscal sustainability in Iran. To do so, I have employed two different forward-looking and backward-looking approaches. First, the backward-looking approach is the fiscal policy rule proposed by Daving & Leeper (2011). Precisely, this rule determines that whether the fiscal policy is active (unsustainable) or passive (sustainable). To estimate the fiscal policy rule, I have exploited Markov switching model (MSM) which examines the tax rate response to debt dynamics under multiple regimes. Second, the forward-looking approach is the modified Blanchard’s tax gap indicator (1990) for an oil-producing country. In fact, this indicator predicts the amount of tax adjustment required to stabilize the future amount of government’s debt back to its value in a particular base year. I have used time series data over the period spanning from 1993(Q1) to 2013(Q4).

This paper explains bilateral trade patterns between South Korea and thirteen OPEC member countries over the period 1980-2014 using a gravity model. The estimation results show that the gravity equation fits the data reasonably well. We confirmed the existence of long term relationships between the bilateral trade flows and the main components of gravity model - GDP, income (GDP per capita), the difference in income, exchange rate, the openness level, distance and WTO membership – through the Fixed effects (FE), Random effects (RE) and the FMOLS approaches. The findings show that the trade pattern between South Korea and OPEC member countries relies on the Heckscher-Ohlin (H-O) theory, thus being explained by difference in factor endowments such as energy resources and technology. It is also found out that South Korea – OPEC trade is well explained by the factors that influence the energy security of South Korea such as oil reserves, transportation costs and political stability.

Today, debt stabilization in an uncertain environment is an important issue. In particular, the question how fiscal and monetary authorities should deal with this uncertainty is of much importance. Especially for some developing countries such as Iran, in which on average 60 percent of government revenues comes from oil, and consequently uncertainty about oil prices has a large effect on budget planning, this is a significant question. For this reason, we extend in this paper the well-known debt stabilization game introduced by Tabellini (1986). We incorporate deterministic noise into that framework. Also we solve this extended game under a Non-cooperative, Cooperative and Stackelberg setting assuming a feedback information structure. The main result shows that under all three regimes, more active policies are used to track debt to its equilibrium level and the smaller this equilibrium level becomes, the more fiscal and monetary authorities are concerned about noise. Furthermore, the best-response policy configuration if policy-makers are confronted with uncertainty seems to depend on the level of anticipated uncertainty.

In this paper, we investigate the existence and the nature of real exchange rate misalignment in Organization of the Petroleum Exporting Countries (OPEC). To do this we estimated a cross country basic real exchange rate determination model for 1990-2012 and extracted historic trend of misalignment. The results imply that all OPEC countries have had misalignment -of different kinds though- in their real exchange rate. In order to ensure the robustness of results, we also focused on historic trend of real exchange rate misalignment in Iran, which was derived by model, and observed considerable consistency with realities of policy making and economic performances in Iran. This indicated the compatibility of the estimation results with countries’ actual events.