مهدی دارابی

The daily unofficial exchange rate is crucial role in economic agents' decision-making and expectations in Iran. Hence, policymakers have tried to manage the unofficial market by promoting the official exchange rates as a leading price. In this regard, they have established official platforms for foreign exchange transactions. This study investigates the causal relationship between exchange rates discovered on the platforms and unofficial exchange rates by employing the Hong time-varying causality test based on the DCC-MGARCH method. Empirical results show a unilateral causal effect between the unofficial and official exchange rates. The instantaneous causality test results show an instantaneous unilateral causality from unofficial to official exchange rate over the whole period. However, the reverse is only found for some special sub-periods, such as when the extent of sanctions decreases, and the possibility of the Central Bank's intervention increases.

The theory of relative purchasing power parity to determine the long-run trend of the exchange rate in Iran is quite sensitive to the base year selection. So, by changing the base year, trends with a level difference of several hundred percent are obtained. It means that the long-run trend of the real exchange rate is not at a constant level. In other words, contrary to the PPP theory, the real exchange rate trend is not stationary. Empirical studies consider the non-stationary change in terms of trade resulting from the changes in the real oil price as one of the reasons. This study examines the nexus between the real exchange rate and terms of trade in Iran from 1960 to 2020, using the autoregressive distributed lag approach to cointegration as the estimation method. We find that higher terms of trade lead to a decline in the actual exchange rate and vice versa. The results indicate a long-run relationship, which means that the condition needed to estimate the long-term trend of the exchange rate in Iran is to have the same terms of trade in the base year.

There are many researches about the role of institutions in different aspects of economic performance. However, in the context of institutional analysis, the issue of technical efficiency has been neglected. This paper investigates the role of institutional quality in the technical efficiency of selected countries in Asia and the Middle East using the stochastic frontier analysis (SFA) approach over the period 1996-2017. By adopting the maximum likelihood estimation (MLE), the estimates associated with the production function and the technical inefficiency equation have been obtained. The examination of technical efficiency based on institutions was carried out in accordance with the Battese and Coeli’s (1995) and Green’s (2005) model in the form of Cobb-Douglass function and using Institutional indicators of governance and then institutional indicators of CIRI. Estimates in both cases represent the fact that a significant part of the technical inefficiency was due to the weak and undesirable qualities of the governing institutions of these countries. Moreover, the estimated results show that inspite of the balanced situation in production inputs, due to institutional weakness among selected countries, Iran is the most inefficient country in terms of technical effeciancy. This empirical finding further emphasizes the need for institutional reform.