کریم اسلاملوییان

In recent years, policy makers have increasingly recognized the significance of vulnerability to climate change. This urgent situation necessitates the implementation of immediate, extensive, and comprehensive measures. Extensive scientific consensus has demonstrated that human activities have contributed to significant climate warming trends. However, despite this evidence, there are individuals who remain skeptical and deny the existence of climate change. Consequently, addressing this skepticism and effectively tackling the climate crisis require fundamental changes in behavior and attitudes across various levels and domains of human life. Therefore, the primary objective of this article is to examine the behavioral factors involved in climate policy making, with a particular emphasis on the role of cognitive biases.

This research employed a semi-experimental method, drawing on the principles of behavioral economics. The study utilized a design that included both an experimental group and a control group, with pre-test and post-test assessments. The experimental group was exposed to different information frames, which were developed based on the principles of behavioral economics, while the control group did not receive any framing intervention.
Data for this study was collected through fieldwork and a questionnaire. The statistical population consisted of individuals who had access to WhatsApp, Telegram, and Instagram platforms during the experiment, which took place in the spring of 2023. The target sample size for this research was determined to be 600 participants, divided into six groups of 100 individuals each. The sample size was determined using Cochran's formula for limited populations. Additionally, a random sampling method was employed in this research.

This article aims to establish a connection between climate policy and behavioral sciences by introducing the practical and cost-effective approach of nudge theory. Drawing on insights from behavioral economics, specifically through behavioral interventions that leverage biases such as loss aversion, hyperbolic discounting, and the framing effect, this study investigates how these interventions can encourage individuals to make choices that align with addressing climate change and environmental concerns. Moreover, existing research has demonstrated that integrating the framing effect with other cognitive biases can be an effective and low-cost policy tool for studying environmental behavior.Using a semi-experimental methodology, this article examines the impact of information formatting, including profit and loss framing, hyperbolic discounting bias, as well as extensive and continuous information presentation, on individuals' general attitudes and understanding of climate change. The hypotheses of this research were derived from the literature of behavioral economics, cognitive science, and previous studies in the field of environmental issues. The findings of this research indicate that individuals exhibit a greater sensitivity to loss framing, supporting hypothesis H1. In other words, people are more responsive to potential losses than gains when making decisions. Additionally, the results demonstrate that individuals display a significantly higher willingness to participate when presented with present-loss and present-profit framing compared to future-loss and future-profit framing, aligning with hypothesis H2. This preference for the present over the future, known as present bias and hyperbolic discounting bias, has been extensively examined and validated in behavioral economics literature. Furthermore, the findings show that framing losses and emphasizing the present context contribute to a heightened perception of risk, consequently increasing individuals' willingness to take preventive measures under a loss framework.Additionally, the provision of information in a broad and continuous manner also yielded a significant effect in influencing individuals' behavior, corroborating hypothesis H3.

This study offers novel insights for policymaking and governance regarding public participation in mitigating the impacts of climate change. The findings indicate that the utilization of loss-present framing and continuous framing proves more effective in increasing the willingness of the general public to engage in climate change reduction efforts. Based on the research conducted in this article, climate change mitigation policies can be effectively promoted in public settings through the implementation of nudges that employ loss-present framing when delivering information.Furthermore, the current reliance on economic incentives in most policies to encourage public participation is a noteworthy issue. However, this study proposes the use of non-economic incentives and demonstrates the positive impact of nudges on individuals' willingness to engage in projects aimed at reducing the effects of climate change

One of governments' key responsibilities is to enhance their citizens' and nations' life satisfaction, subjective well−being, or happiness. Recent advancements in the literature have viewed happiness as a collective right for citizens, thereby emphasizing the societal well−being that governments must ensure for every member of society. Furthermore, some argue that happiness is a national issue and that efforts should be made to ensure the happiness of the general public (Lee, 2022).In addition to critical economic variables such as unemployment and economic growth, other factors such as corruption control, which is one of the institutional indicators and an essential component of good governance, can significantly impact the subjective well−being of society. Corruption has a psychological effect on happiness. People may feel shame when they feel that their actions cannot go through a legal and accountable system, for example, ifsomeone receives a bribe (Li & An, 2020). This understanding can foster empathy and a deeper comprehension of the issue.Another significant determinant is economic and political uncertainty, which can impact societal happiness in various manners. Uncertainty exerts a detrimental impact on investment, economic expansion, public confidence, and the aspiration for a more promising future. It can directly and indirectly shape individuals' and society's subjective well−being or happiness.The impact of Internet access on happiness in Iran is a complex issue that warrants further investigation. Internet access can enhance happiness in a country like Iran by improving life satisfaction. However, it is essential to note that it may also lead to frustration and disappointment, especially during harsh economic and non−economic sanctions, when people compare their living standards with those of other nations, negatively impacting their subjective well−being.This research contributes to the existing literature on happiness in Iran by examining the effect of corruption as an essential indicator of institutional quality, economic and political uncertainty, access to the Internet, the COVID−19 crisis, and sanctions on subjective well−being in Iran. In addition, we include other control variables such as economic growth and unemployment.

To investigate the main determinants of happiness in Iran, we propose estimating the following model:,   (1)Equation (1) demonstrates that happiness (HAP)[1] is influenced by several factors, including LGDPP (logarithm of real gross domestic product per capita),[2] WUI (world uncertainty for Iran),[3] COR (corruption),[4] NET (internet access),[5] UN (unemployment rate),[6] SAN (US sanctions against Iran),[7] and COVID19 (the COVID−19 crisis).[8]
The model is estimated using the autoregressive distributed lag method (ARDL). Pesaran and Shin (1995) show that if the cointegration vector is obtained using the ARDL method, the least squares estimator is less biased and more efficientin small samples, provided the lags are specified correctly. Using the ARDL method also has the advantage of obtaining a consistent estimation of coefficients in the long−run model when our variables are integrated of order zero or one (i.e., I(0) or I(1)).[9] This method also allows us to specify the speed at which the deviation from equilibrium is corrected in each period. We consider the following  ARDL(p,q1,q2,...,qk) model:[10](2)where  and s are parameters,  represents the random disturbance term. By using information criteria such as Akaike Information Criterion (AIC), Schwarz Bayesian Criterion (SBC), and Hannan−Quinn Criterion (HQC), it is necessary to select appropriate lags (p and q) for the variables to estimate the short−run model. After choosing the appropriate ARDL model, the coefficients of the long−term model can be calculated. If there is a long−run equilibrium relationship among the variables, the following Error Correction Model (ECM) can be estimated:A(L)ΔHAPt =B(L)ΔXt + (1−Π) ECTt−1+G 'Zt + et.  (3)In which, A(L)= 1−a1L −a2L2 −.... −apLand B(L)= 1 − bk1L − bk2L2 − .... − bkj  (k=1,...,5), Π =(a1 +a2+ .... +ap)Where L is the polynomial lag operator, G is the vector of parameters, and et is the disturbance term. In this equation, X=( ), and Δ represents the first−order difference of the variable, ECTt−1 is the error correction term, and Zt is the vector ofdeterministic variables such as constant value and exogenous variables with fixed lags like COVID−19 and SAN. The coefficient of the error correction term captures the speed of adjustment toward long−term equilibrium. The model was estimated for quarterly data from 2005Q1 to 2022Q4, and the bound test was used to check the cointegration among the variables.

Before estimating the model, we performed various unit root tests. The results rejected the null hypothesis of unit roots for the second difference of the variables, indicating the variables are integrated of order zero or one. Since we have a combination of I(0) and I(1) variables, we conducted the bound test for cointegration. The results confirm the presence of a long−run equilibrium relationship among variables. Moreover, we used the Akaike Information Criterion to choose the optimum lags for the short−run model.[11]Furthermore, the Breusch−Godfrey serial correlation LM and the heteroskedasticity Harvey tests did not reject the null hypotheses of no serial correlation and homoskedasticity. The detailed results of these tests are presented in Table 1.We have estimated three models: (1) a short−run model, (2) a long−run model, and (3) an error correction model (ECM). The estimation of the long−run model reported in Table 2 indicates that less corruption and higher access to the internet increase happiness. Moreover, world uncertainty and higher unemployment reduce subjective well−being. Our finding shows that economic growth is anti−happiness, a phenomenon potentially stemming from the unequal income distribution within the country. The short−run estimation indicates that sanctions and COVID−19 decrease happiness. Our error correction model shows that about 89 percent of errors towards equilibrium are corrected in each period.[12] Our results underscore the role of fighting corruption, reducing uncertainty, and improving income equality in increasing subjective well−being in Iran.

The estimation results show that reducing corruption increases happiness in Iran. This result is similar to the findings of Tayet al. (2014), Flavin (2019), Li and An (2020), Yan and Wen (2020), and Behera et al. (2024). Corruption can increase business transaction costs, destroy political trust, and reduce subjective well−being.  Another finding indicates that the increase in world economic and political uncertainty for Iran negatively impacts happiness. This adverse effect is likely due to the psychological impact, which diminishes hope for a better future, and the negative implications on investment, employment, and economic conditions. Access to the Internet has been observed to contribute to increasedwell−being in countries such as Iran, which face severe economic and non−economic sanctions. This access not only enhances the comfort of individuals but also provides them with a valuable source of information.In addition, the result shows that economic growth in Iran is anti−happiness, possibly due to the unequal distribution of growth among Iranians. Easterlin (1974) proposed the uncertainty about the relationship between income and happiness. According to some empirical evidence, an increase in income under certain conditions may not increase happiness. Frey and Stutzer (2002) consider this relationship to be complex. Yan and Wen (2020) also emphasize that corruption and increasing the income gap are crucial factors that reduce happiness.Furthermore, the rise in unemployment leads to a decline in happiness in Iran. This finding is similar to the results of Clark and Oswald (1994), Blanchflower (2007), Agan et al. (2009), Abounoori and Asgarizadeh (2013), and Sameem and Buryi (2019). The effect of unemployment on subjective well−being is important, so Li and An (2020) show that reducing unemployment can even partially compensate for the reduction of happiness caused by corruption. This underscores the urgency of addressing unemployment to improve well−being in Iran.The analysis of the short−term model indicates that the Covid−19 pandemic and sanctions have led to a decrease in happiness. It is imperative to not only consider the impact of variables such as employment and economic growth, but also to underscore the significance of combating corruption, enhancing society's access to the Internet, and reducing economic and political uncertainty to boost subjective well−being in Iran. These findings carry significant implications for policymakers endeavoring to enhance happiness.

This article is an extension of the Eslamloueyan (2015). One of the key findings of that research is that the profit doesn't need to belong to only one production factor, but other inputs can also share in the profit. In addition, the economic principle that those who bear the risks are entitled to profit does not contradict Islamic viewpoints. Using a simple model, we compare the distribution system based on fixed payment to the profit-loss sharing system under uncertainty. Additionally, our framework allows us to examine Ayatollah Sadr's theory regarding the share of the Mamluk material owner in production. We argue that there is no difference between the fixed payments and the profit-loss sharing methods to compensate the services of production factors in the equilibrium under the certainty case. However, when there is uncertainty, our results suggest that replacing the fixed payment system with a profit-loss sharing system is more compatible with distributive justice and better maintains human dignity. Hence, to better compensate for the services of different factors of production, governments should take specific measures to promote a profit-loss-sharing system. Our findings might be used to develop a theory of profit for an economic system with an Islamic perspective.

Taxes, as the most important source of government revenue and one of the economic policy instruments, play a key role in development policies. In this study, the evolution process of different models of tax evasion (from neoclassical approach to behavioral economics) is investigated, also the assumptions and variables of these models are analyzed. Then, using the analytical hierarchy process (AHP) based on the opinions of tax experts, the factors affecting tax evasion are ranked in different models to determine which model is superior in explaining and measuring the factors affecting tax evasion in Iran. The results show that instability of preferences, loss avoidance, and ambiguity avoidance are the main factors influencing tax evasion. Correspondingly, rational behavior and behavioral adaptation have the least explanatory power as regards tax evasion in Iran. Based on the results, in analyzing and measuring Iranchr('39')s tax evasion, a paradigm shift towards behavioral economy models is needed.

After the victory of the Islamic Revolution and the capture of the spy nest, the West, and especially the United States, in addition to pursuing other tools, has also used the tools of sanctions and has implemented many sanctions against Iran. One type of sanctions is oil sanctions, which were imposed to force Iran to join the international community. The US and its allieschr('39') embargo on Iranian oil affects the variables of the Iranian and world economies. For this reason, a computable five-zone global trade model (GTAP) is used to calculate the implications of the game tree between the three independent actors of the United States, the European Union, and Iran. The closing of the GTAP model has been changed according to the assumptions used. The results show that the US, Iran and major oil buyers from Iran are damaged by the sanctions. This damage is exacerbated by increasing oil restrictions. With the escalation of sanctions, the European Union is also gaining negative welfare. In the Nash equilibrium, the United States and the European Union will choose weak sanctions, and Iran will try to circumvent the sanctions. Due to the economic costs of oil sanctions against Iran, the lack of full understanding between the United States and Europe, and Iranchr('39')s efforts to circumvent sanctions, it seems that the United States will not be able to reduce Iranchr('39')s oil exports to zero.

T The financial soundness indicators reveal the significant signs of distress in the Iranian banking sector. An important question is whether the implementation of the countercyclical capital requirement rules in the form of the Basel III type-rules increases the stability of the banking sector in Iran. The literature on macroprudential policy in Iran lacks a model to study the effects of the countercyclical capital requirements rules on the ratio of capital to loans as an important indicator of the soundness of the banking sector in the presence of an adverse supply shock. Moreover, no study has investigated the impact of this macroprudential policy tool on the dynamics of consumption and investment in Iran. To fill these gaps, we develop and estimate a New Keynesian dynamic stochastic general equilibrium (DSGE) model. The model is estimated by the Bayesian method for three different capital requirements rules, namely (1) the constant capital requirements, (2) the countercyclical capital requirements rule that reacts to the ratio of loans to output, and (3) the countercyclical capital requirements rule that responds to economic growth. The results show that when a negative supply shock hits the economy, the implementation of the countercyclical capital requirements rule reduces the instability of the banking sector in Iran. Moreover, we find that the model with the countercyclical capital requirements rules results in more stable output, inflation, consumption, and investment. Furthermore, our results suggest that the countercyclical capital rule that reacts to economic growth enhances banking stability in Iran. These findings might have important policy implications for policymakers when implementing macroprudential policies in Iran.

The researches have generally ignored the effect of an oil price shock passing through financial channel. To fill this gap, we examine the impact of a fall in oil price on output and inflation through trade and financial channels by using a Global VAR (GVAR) model in oil-exporting countries. Our sample includes 15 OPEC and non-OPEC oil-exporting countries, 14 oil-importing countries and European :union: as a block. Our GVAR model is estimated for the period 1990Q1-2017Q4. We show that a combination of trade and financial channels better capture the oil shock transmission mechanism in our model. The impulse-response functions indicate that an oil price falling results in a sustained decline in output of oil-exporting countries. Furthermore, the impact of a negative oil price shock on inflation in developing oil-exporting countries is positive, whereas its effect on the inflation in developed oil-exporting countries is negative. Moreover, we show that the responses of real exchange rates to a falling oil price might partially explain higher inflation rate in these countries. We conclude that a fall in oil prices might bring about stagflation in developing oil-exporting countries. These findings might have importance policy implications for policymakers and social planners in developing oil-exporting countries.

The role of public sector expenditure shocks in the economy has always been of interest to policymakers and economists.  The government expenditures include government consumption and investment. This study investigates the effects of government expenditure shocks on macroeconomic variables for the annual data during 1978-2016 in Iran. In particular, the effects of government expenditure shocks on product variables, private sector consumption, private sector investment, real wages, and employment are examined. In addition, in the present study, the effect of government expenditure on household and enterprise behavior has been investigated. Therefore, the role of government investment through the production function and the role of government consumption through the utility function have entered the model. The model, appropriated for Iran’s economy, is designed in such a way that the monetary rule of the Central Bank of Iran would be based on the amount of money and also the government budget would be based on oil revenues, taxes, bonds and loans from the Central Bank. Finally, the model is estimated for the Iranian economy. The advantage of this model over other studies in Iran is the simultaneous investigation of the effects of various types of government expenditure on the inputs efficiency and consumer preferences. In other words, the model includes the impact of public sector investment on improving the efficiency of enterprises and dependence of consumer preferences on government consumption. The features of the model used in this research include having the fundamentals of microeconomics, nominal rigidity, incomplete competition market, and general equilibrium. The sections of model include households, enterprises, government, and the central bank. Since the model is random, it is possible to study the effects of nominal and actual shocks on key variables of the economy. In other words, the new Keynesian Dynamic Stochastic General Equilibrium (DSGE) has been used to estimate the model. After solving the model, the system of linear equations by Bayesian method is estimated for the Iranian economy. The estimation results show that public sector investment has a direct effect on the production function and also government consumption has a direct effect on the utility function. The Markov-Chan-Monte-Carlo (MCMC) univariate and multivariate convergence tests, the matching of the prior and posterior distributions, as well as the final likelihood value were used to evaluate the model. Moreover, the model was evaluated through   matching simulation diagrams of variables and shocks. According to the results obtained from evaluation, this model seems appropriate for the Iranian economy. The immediate responses of government consumption and investment shocks to the variables of product, private sector consumption, private sector investment, real wages, and employment are examined. The effects of government consumption and investment shocks are also compared. The results show that in Iran, the accumulation of public investment improves the efficiency of enterprises. Moreover, consumer preferences are influenced by government consumption. In addition, the government consumption shock increases private sector investment, product, employment and real wages. The positive government investment shocks also increases efficiency, employment, real wages and reduces private consumption. On the other hand, there is also a complementary relationship between public and private investments. It seems that government investment can increase private sector investment by creating and expanding infrastructure. The results emphasize the role of the positive shock of government investment in improving economic conditions. Based on the findings, it seems important to pay attention to the role of government expenditure policies in dealing with the recession.

The interaction between institutional quality and the mechanism of oil shock diffusion might have a significant effect on macroeconomic dynamics in an oil-exporting country. The literature lacks a formal model to address the role of institutional quality in the economic performance of an oil-rich developing economy. Using a new Keynesian dynamic stochastic general equilibrium (DSGE) framework, this study develops a model to investigate the response of macroeconomic variables to changes in institutional quality resulted from oil shocks in Iran as an important oil-exporting country. Our modeling allows us to show how institutional quality and oil revenues affect households, firms, government, and the central bank. The model is solved and calibrated for the period 1959-2017. The results indicate that the destruction of institutional quality caused by a positive oil shock prevents the Iranian economy from reaping the fruits of an increase in oil revenues. Oil revenues and their shocks by destroying the institutional quality through the expansion of rent-seeking ‎activities, increasing transaction costs of production, reducing the impact of government spending, and ‎diverting monetary and fiscal policies from the targets result in negative effects on Iranchr('39')s non-oil ‎production in the long run.‎ To reduce the destructive effects of oil shocks on institutional quality in the Iranian economy, we suggest the policymakers in Iran reduce the dependency of the government budget on oil revenues.

Institutional quality is one of the key determinants of the economic performance of countries. The literature lacks a formal model to address the role of institutional quality changes in the macroeconomic dynamics of a developing economy. Using a new Keynesian dynamic stochastic general equilibrium framework and incorporating rent-seeking technology, this study investigates the effect of institutional quality shocks on the business cycle and the dynamic behavior of key macroeconomic variables in Iran. Our modeling allows us to show how institutional quality affects behavior of households, firms, government, and the central bank. The model is solved and calibrated for the period 1984-2017. The results indicate that better institutional quality increases private consumption, government spending, and non-oil production through increasing productive activities, decreasing transaction costs, improving productivity, enhancing investment, and promoting more effective monetary and fiscal policies. More specifically, policymakers should take certain measures to improve the quality of institutions in Iran through boosting government stability, fighting corruption, controlling rent-seeking activities, improving law and order, increasing democratic accountability, and bureaucracy quality. These findings might have important policy implications for policymakers in Iran.

In recent years, some research has focused on the importance of the origin of an oil shock for macroeconomic dynamics in both oil-exporting and importing countries. The existing literature lacks a proper open Stochastic Dynamic General Equilibrium (DSGE) framework to investigate the effect of the origins of oil shocks on macro variables in a two-country model consisting of an oil-exporting county and an oil-importing country. To this end, we develop and solve a new Keynesian DSGE model to show how the different oil shocks originating from oil supply or oil demand, might have diverse impacts on key macroeconomic variables in oil-exporting and importing counties. For the case study, we use data from Iran as an example of an oil-exporting country that trades with the rest of the world. Our DSGE model is estimated by using the Bayesian method for the period 1986:1-2017:4. The result shows that an oil shock originated from the shortage of oil supply (an exogenous decrease in Iran's oil production) decreases total production, non-oil trade, employment, inflation and consumption in this oil-exporting country. While a negative oil supply shock increases production costs and reduces production and consumption in Iran. However, an oil shock originated from an increase in the demand for oil raises output, non-oil trade, employment, consumption, and inflation in Iran as an oil-exporting country while a demand-side oil shock boosts production and increases inflation in this country.

Using a sticky price dynamic stochastic general equilibrium (DSGE) model, this paper study how the presence of both Ricardian and non-Ricardian households in the economy might affect the effectiveness of the monetary policy on macroeconomic dynamics and the determinacy of equilibrium in Iran. If the household participation in the financial market is not sufficiently big, the slope of a dynamic IS curve becomes positive. In the case of an upward-sloping IS curve, the equilibrium is indeterminant. Based on the degree of financial development in Iran, we estimate the share of non-Ricardian households for two periods: 1990 to 1999 and 2000 to 2017. The results show that during the first period, the share of non-Ricardian household in Iranian economy was 54 percent and the slope of the IS curve was upward. Hence, the model did not have a stable equilibrium during 1990-1999. However, in the second period, with an increase in the level of financial development in Iran, the share of non-Ricardian household decreased to 38 percent. In this case, the dynamic IS curve sloped downward and the model had a stable unique equilibrium. The impulse response functions show that in the second period, a monetary shock has the expected effect on macroeconomic variables including output, inflation, employment, real wage and the growth rate of money base. Our results underscore the role of households' participation in the financial market in the effectiveness of the monetary policy on macroeconomic variables and the determinacy of equilibrium in a dynamic stochastic model.

The purpose of this paper is to examine the fluctuations of entrepreneurial wealth in an open participatory economy and compare it with an interest-based economy. In this hypothetical participatory economy, the investor can freely choose between two types of domestic cooperative financing and external interest-based financing (in international financial markets). To this end, a dynamic model is designed and solved based on the dynamics of entrepreneurial wealth. The results show that when the two cooperative economies are exposed to the same conditions, which means that the opportunity cost of investing is equal to both, entrepreneurial wealth and therefore national investment and production in the cooperative economy are less volatile than the conventional economy. But when the opportunity cost of investing in the two economies is different, only under conditions of entrepreneurial wealth and production in a participatory economy can they be less volatile than the conventional economy. It is considered that these conditions depend on the values of the interest rate parameters, the participation rate and the minimum safe return of the domestic economy.

This paper, we analyze the double-dividend issues by the design of overlapping generations approach. We characterize the necessary conditions for the obtaining a double dividend, i.e. an improvement of environmental and non-environmental welfare when the revenue of the pollution taxis recycled into a change of the labor tax rate. We show that first advantage of the double dividend theory depending on; i) The level of energy consumption among elderly and young generations is not high enough so that the implementation of the energy tax policy will increase the government's revenues so much and subsequently the reduction in the tax rate on labor wages cannot keep to be fixed government revenue level.ii)The income effects of increased income labor tax on the government revenue aregreater than the substitution effects. Also, the second advantage of the double dividend theory is pertained to; i)The multiple coefficient of the setup cumulative policy (simultaneously increased energy tax and decreased labor income tax) is greater than multiple coefficient of the increased energy tax on the interest rate. ii)The multiple coefficient of the implementation this cumulative policy is lower than the multiple coefficient of the indirect effect of energy tax on the wage level of young generation.

The purpose of this study is to investigate the possibility of non-linear behavior of exchange rate pass-through in the states of boom and recession in Iran. To the best of our knowledge, this issue has not studied for Iran. To this end, using monthly data for the period of 2002:4-2017:3, we estimate a structural threshold vector autoregressive (STVAR) model. Our endogenous variables include exchange rate, import price index, producer price index, consumer price index, industrial production index, and the interest rate. The results show that an increase in exchange rate has positive impacts on import price, producer price and consumer price indices. The impulse-response functions indicate that the reactions of the import price, the producer price and the consumer price to exchange rate shock are higher in the boom than that in the recession. Hence, our finding confirms the non-linear behavior of the exchange rate pass-through in Iran. Moreover, the degree of exchange rate pass-through in Iran is incomplete. The results show that the policymaker should take into consideration the importance of non-linear behavior of exchange rate pass-through when conducting an exchange rate policy in Iran.

Risk-taking channel refers to the banks’ risky activities following the expansionary monetary policy. This channel may affect the financial and output stability. The risk-taking channel can influence bank soundness and hence be a source of financial instability and financial crisis. This topic has been the focus of many researches after the financial crisis of 2008. Using the structural vector autoregressive model, this paper investigates the existence of a risk-taking channel in Iran’s banking system for the period 2006:2-2015:1. The results of impulse-response functions confirm the presence of risk-taking channel in the Iran’s banking system. This channel is considered to be one of the sources of high non-performing loans in Iran’s banking system. Therefore, banking supervision and macro prudential policies may reduce the banks’ risky activities. Moreover, introducing risk-taking channel into the central bank’s loss function might be helpful in achieving financial stability and reducing the negative impacts of risk-taking channel on output and economic growth in Iran.

The IS-LM framework was a result of Hickian synthesis. Hicks (1937) merged the Keynesian and Classical macro models in a context of a general equilibrium framework. This analytical frame was rapidly became a standard apparatus to examine the monetary and fiscal policy. In order to teach and analyze macroeconomic policy with an Islamic perspective, many Muslim researchers have developed their own version of Islamic IS-LM framework. Those who have tried to do Islamization of IS-LM model have eliminated interest rate from this framework and replaced it with either the financiers (capital owner) share in the profits of the firms or expected rate of profit. The main goal of this paper is to analyze the stability and consistency of Islamic models with an IS-ML structure. It shows that the Islamization of this framework would not resolve the possible instability of the IS-LM models. An unstable Islamic IS-LM model may in turn result in inconsistent aggregate demand and aggregate supply (IS-LM-AS) framework. More specifically, when the system is not stable, it is not possible to derive a standard aggregate demand and hence one cannot predict the effect of monetary and fiscal policy. Our finding suggests that the Muslim researchers should be more caution when applying this framework to Islamic economics. Otherwise, the shortcomings and weaknesses of this Hicksian analytical tool can be easily transferred to an interest-free IS-LM model built upon it.

There are various methods for mobilizing resources in an interest-free banking system, including pooled deposits and separate deposits. The purpose of this study is to develop a theoretical model to study the implications of pooled and separate deposit methods for initial paid profit and also expected profit from depositor's viewpoint. In the pooled deposits, bank receives deposits in one unified contract. But in the separate deposits, bank provides an option form depositors to choose between murabahe or musharakah contracts. The results of our theoretical model show that the Initial paid profit to depositors in pooled method is greater than or equal to initial paid profit in separate method. The result verifies the Markowitz’s portfolio theory. In other words, the portfolio diversity reduces the risk of bank customers. Moreover, we find out that the expected profit of depositors in pooled method is more than that of separate method. One can show that under certain condition when the depositors are very risk averse, they prefer the separate deposit to pooled one. Finally, we conclude that the best method for an interest-free banking system is to use both methods simultaneously. This provides more options for depositors with different preferences and hence increases their utility.

The way monetary authorities conduct policy has important implication for reducing the adverse effect of oil shocks on internal and external sectors of an oil exporting country. The change in money supply resulted from an oil shock, requires an endogenous reaction of monetary authorities. In other words, monetary authorities can conduct an active or passive policy in response to oil price changes. In the case of active policy, they should conduct a contractionary monetary policy when there is positive increase in oil price. This active policy can be either unanticipated or anticipated. The main goal of this paper is to develop and solve a New Keynesian Dynamic Stochastic General Equilibrium model for an open economy in order to study the effect of monetary authorities’ reaction to oil shock on external and internal sectors of Iran as an oil exporting country. The calibration results show that the effect of a positive oil shock on inflation is higher in the case of anticipated monetary policy compared with the case when the monetary policy is unanticipated. However, we find out that the effect of oil shock on output and investment is independent of way the monetary policy is conducted. Moreover, positive oil shock decreases the ratio of non-oil trade balanced to GDP but increases the ratio of trade balanced to GDP. These effects are intensified when monetary policy is anticipated. This shows that the way that monetary authority reacts to an oil shock affects inflation and the ratio of trade balance to GDP.

International trade is an important channel for transmitting the effect of an oil shock to the trade balance and macroeconomic variables. In an international framework, the trade channel transmits oil shocks across economies through changes in the non-oil traded goods. Most researches that have investigated the effect of an oil shock on macroeconomic variables in Iran have ignored the role of trade channel. The main goal of this paper is to fill this gap in the literature for Iran as an oil producing and exporting country. More specifically, we develop and solve a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model for an open economy to study the effect of an oil shock on trade balance and macroeconomic variables in Iran.
The model consists of households, firms, government, central bank and foreign sector. Following Kia and Darrat (2007), Walsh (2010) and Sanchez (2011) household derives utility from consuming a final good, holdings of domestic and foreign real balances and leisure. This study is different from other researches on Iranian economy by introducing foreign real money balance in the utility function of our representative household. Production sector consists of domestic goods producing firms and intermediate goods producing firms. Production of these goods requires capital, labor, and oil. The investment bundle is a composite of the domestically produced good and inputs imported from abroad. The consumption bundle is a composite of the domestically produced good, oil consumption and imports of foreign goods. Thus, oil is considered in both the production function and the consumption basket. Another distinct feature of this study from other Iranian studies is the presence of oil in both production function and consumption bundle. This allows us to examine the dynamics of trade balance in response to an oil shock.
In order to evaluate the model, we compared the moments of actual and simulated data. Our finding confirms the validity of model. The impulse response functions show that an oil shock to Iranian economy reduces the ratio of non-oil trade balanced to GDP. This might be due to the fact that a positive oil shock has an adverse effect on the growth rate of foreign oil importing countries. Hence, lower economic growth of oil importing countries will result in lower imports from oil producing countries. This in turn will deteriorate the non-oil trade balances in oil exporting countries. Given the role of non-oil trade balance in boosting employment and generating jobs and foreign reserves, this finding suggests that policymakers in Iran should take appropriate measures to reduce the economic dependence on oil sector as a major source of income. In addition, a positive oil shock has direct effect on the ratio of total trade balance to GDP. In other words, in an oil-exporting country such as Iran in which oil is an important source of foreign income, an increase in oil price results in an improvement in trade balance. However, the indirect effect of oil shock on the trade balance is negative. However, our result shows that the net effect of oil shock on the trade balance of Iran as an oil-exporting country is positive.
Moreover, we find out that oil shock will transfer income from oil-importing country to the oil-exporting country. Therefore, positive oil shock induce wealth effect and cause the GDP to increase. Moreover, a positive oil shock results in higher investment. In addition, oil shock changes the cost of producing goods and services and cause inflation.The impulse responses show that adjustment of trade balance is slower than that of other macroeconomic variables.

The main goal of this paper is to study the effect of non-renewable energy on output and institutional quality in Iran as an energy-rich country for the period 1984-2013. To this end, we introduce institutional quality into an endogenous growth model. The model allows us to examine how the resource abundance can influence output both directly and indirectly.In our model, the quality of institution is assumed to affect output through its impact on research and development (R&D) activities and the allocation of labor force between productive and non-productive sectors. The estimation results of our state-space model indicate that one percent improvement in institutional quality increases output and R&D expenditure by 0.22 and 0.23 percent, respectively. Moreover, we find that one percent increase in non-renewable energy raises output directly by 0.49 percent. However, we show that the use of non-renewable energy has a downward pressure on the quality of institutions in Iran and hence have negative impact on output indirectly.More specifically, one percent increase in using non-renewable energy decreases the index of institutional quality by 0.59 percent in Iran. This negative impact offsets the positive effect of using more non-renewable energy on GDP and hence lowers the growth rate. This finding highlights the importance of the institutional quality for enhancing the effect of non-renewable energy on output growth in Iran..

Inflation dynamics is a subject of numerous theoretical and empirical researches in economic literature. One important economic cost of inflation is the uncertainty that it creates about future inflation rates. This in turn causes an uncertain environment for economic activities. The households and firms’ decision under inflation uncertainty affects the allocation of resources and the level of consumption¡ investment and economic growth. Therefore¡ the issue of inflation and inflation uncertainty nexus is a hot topic in macroeconomic and monetary economics.
After the seventies many empirical researchers have studied inflation dynamics in different countries. In the last fifteen years many economists have investigated the relation between inflation and its uncertainty in both rich and poor countries. Some researchers argued that there is a positive relationship between inflation and its uncertainty¡ while there are others who find negative relationship between these two variables. More recently¡ Evans and Wachtel (1993) and Chang and He (2010) have shown that the inflation and inflation uncertainty nexus can be influenced by different inflationary regimes. They have shown that effect of inflationary shocks on its uncertainty might not be symmetric. In other words¡ the impact of positive price shocks on inflation uncertainty is different from their negative price shocks. This asymmetric effect has been the subject of recent studies.
The focus of our paper is on inflation dynamics and its relationship with inflation uncertainty in Iran. High inflation rate in recent years has adversely affected the wellbeing of many middle class and poor families in Iran and hence is an important challenge for policymakers in this country. It has become clear that the uncertainty resulted from high inflation have inflicted a heavy cost on the Iranian economy. There are many researchers that have investigated the dynamics of inflation in Iran. Among these studies¡ some have examined the relationship between inflation and inflation uncertainty in Iran. However¡ these researchers have ignored the impacts of regime switching on this relationship. The main goal of this paper is to fill this gap in the economic literature of Iran. More specifically¡ it examines how different inflation regimes can affect inflation and inflation uncertainty nexus in this country.
For this purpose¡ a Markov switching - asymmetric generalized autoregressive conditional heteroskedasticity in mean model is estimated for Iran over the period 1990:03 -2013:07. This makes it possible to change conditional variance of the error term over time and hence allows us to study the behavior of each state variable in various regimes. More specifically¡ the relationship between inflation and inflation uncertainty are examined in two different inflationary regimes¡ namely inflation pressure and inflation volatility regimes. We first study the effect of inflation uncertainty on the level of inflation in the states of increasing and decreasing inflation pressures. Second¡ we investigate the impact of inflation on inflation uncertainty when the economy is either in the state of high inflation volatility or in the state of low inflation volatility.
The estimation results show that in the state of increasing inflation pressure¡ the effect of inflation uncertainty on inflation is positive. This confirms the finding of Cukierman and Meltzer (1986). However¡ in the state of decreasing inflation pressure¡ inflation uncertainty has a negative impact on inflation. This result verifies the outcome of Holland (1995). Furthermore¡ when the economy is in the state of high inflation volatility¡ inflation has a positive effect on inflation uncertainty. This finding is consistent with the hypothesis of Ungar and Zilberfarb (1993). However¡ when the economy is in the regime of low inflation volatility¡ inflation does not affect inflation uncertainty. Moreover¡ we find that the effect of negative price shocks on inflation uncertainty is higher than that of the effect of positive price shocks.
The estimation results of transition matrix show that when the economy is in the state of increasing inflation pressure¡ it will remain in that state with probability of 95 percent and when it is in the state of decreasing inflation pressure¡ it will continue in that state with probability of 89 percent. In addition¡ when the economy is in the state of high inflation volatility¡ it will stay in this regime with probability of 98 percent and when it is in the regime of low inflation volatility¡ it will continue in the same regime with probability of 96 percent. One might infer from these findings that the inflationary regimes in Iran in highly persistence. In other words¡ when the economy enters an inflationary regime¡ the probability of chaining the state or switching the regime is low. These findings might have important policy implications for Iranian economy. Given the presence of high inflation pressure in Iran¡ one might suggest that monetary authorities should conduct price stability policy. This will allow them to curb both inflation and inflation uncertainty. Our results indicate that it is important for monetary authorities and policymakers to be aware of the type of inflationary regimes that the country is in¡ when conducting their monetary policy.

Many researchers have used different methods to forecast the volatility of goods and capital markets. However, only few have taken into account the importance of data frequency on their predictions. However, none of them have considered the possibility of long run memory in predicting the volatility of oil market. In order to fill this gap in the literature, we have estimated a class of ARFIMA and GARCH models (long- and short-run memory models) with different data frequency to predict oil market volatility. Based on Root Mean Square Error (RMSE) criterion, irrespective of model's type, all models with high frequency data outperform the low frequency data models. The result also shows that at each frequency level, the prediction powers of both ARFIMA and GARCH models are the same. To sum up, we suggest the use of short-run memory model with high frequency data to forecast volatility of oil market. Hence, it seems a proper GARCH model can do the job and there is no need to use ARFIMA model for this purpose.

Regarding to studies in different countries the research and development (R&D) play a major role in economy growth. Investment in R&D increase level of knowledge, and we have increase in production efficiency by knowledge increasing, after that economic growth will improve by productivity channel. Many studies exist on the R&D but in any of them not used the same variable for this indicator. The time series of knowledge level is not visible because of complexity the calculations and measurements of this variable. In this study the level of knowledge is intended as an unobservable variable. After that using LP and OP method the time series of this variable is extracted during the period 1974-2014 for Iranian economy. Estimates this series will be an important way for future empirical studies in research and development. Algorithms and methods that used in this paper can be run for other countries. Based on LP method, results shows during the 40 years of knowledge for Iranian economy has upward trend and the averages of grow rate of knowledge level is 0.42 percent for each year.

This paper aims to estimate various production functions, with emphasis on energy and investment in R& D, in Iran over the period 1979-2010. Following estimation of different production functions including CES (Constant Elasticity of Substitution), GPF (Generalized Production Function), Cobb-Douglas, Transcendental, Translog, and GLPF (Generalized Linear Production Function), a proper production function is selected. The functions are mainly non-linear and their estimation requires large sample sizes. The conventional econometric techniques estimate regression parameters through minimizing residual sum of squares (RSS). However, this approach is less efficient than minimization the Least Absolute Deviation (LAD). Moreover, the conventional nonlinear techniques cannot minimize absolute deviation of errors from their expected values. In order to overcome this problem, we use Genetic Algorithm (GA) method with LAD to estimate six non-linear production functions. The results suggest that the Translog function is the most appropriate production function for the Iranian economy. According to our findings, a 10 percent increase in energy consumption, raises the output by 7.3 percent. However, a 10 percent increase in R&D expenditure only increases the output by 2.6 percent. Finally, the results show that the production function in Iran exhibits increasing return to scale after the end of Iran-Iraq war. Thus, it seems constructing growth models for Iran by assuming constant returns to scale production technology needs to be reexamined.