جستجوی مقالات مرتبط با کلیدواژه « volatility » در نشریات گروه « اقتصاد »

Extended Abstract
Based on macroeconomics and development economics theories, developing countries, like Iran, are facing a high degree of instability of macroeconomic variables. Fluctuations and exchange rate shocks, create an uncertain environment for investors and make decisions unconfident situation for future investments. The empirical study of the relationship between fluctuation and instability exchange rate and share returns in the Tehran Stock Exchange market is discussed. The empirical results make it possible for the decision-making managers of the agriculture and food industries to analyze the interaction and behavior of stock returns and exchange rates simultaneously. Second, a better understanding of the short-term movements of these two markets allows financial managers to make informed financial decisions and investments. In such a situation, the policy maker should be aware of applying policies that cause more volatility in the currency market and create uncertainty in it, in order to provide the basis for the sustainable growth of the capital market.

The fluctuations of the exchange rate as an effective contribution to the proper direction, and a more favorable opportunity to be made for trade, and your investment; for the exchange rate from canal of export and import affect the cost of export, stock prices, and returns. This research investigates the effects of volatility and uncertainty of exchange rates on the stocks return of share in cluster of export-oriented, and the import-oriented and agri-food industries. As a result, the research question is: the share returns of companies listed on the Tehran Stock Exchange (separated to export-oriented, import-oriented, and agricultural and food industries), in case of exchange rate instability and uncertainty (currency fluctuations), in the period of 2010 to 2019 how will it be affected by it?

This investigation led to a series of 165 holding companies for period of 2010-2019. The volatility measure by Generalized autoregressive conditional heteroscedasticity (GARCH) method and based model estimate by Structural vector autoregressive model (SVAR). In the first stage, the conditional and generalized heterogeneity variance model is used to extract exchange rate fluctuations. In the next step, the structural vector explanatory model (SVAR) has been used to investigate the effect of currency instability and uncertainty (currency fluctuations) on the returns and stock prices of companies. To estimate the SVAR model, the self-explanatory vector model or the normal VAR model must be estimated first. After determining the optimal interval and performing model validation tests, by applying structural constraints, reaction functions based on structural constraints are specified. Finally, by using shock reaction functions, the effects of currency instability and uncertainty (currency fluctuations) on the stock returns of companies are evaluated.

The result shows that there is significant relationship between the exchange rate fluctuations stock return of import - oriented company but in other cases, the export- oriented and Agri-food companies there is no relationship between shares return, and fluctuations of exchange rate even by year lag.

The impact on the exchange rate and its fluctuations on import-oriented industries is due to the dependence of the industries on imported raw materials (including inputs and machinery and equipment), which imposes costs on producers at rates higher than the supporting exchange rates, and against the stability policy of central bank of Iran leads to the impossibility of foreign exchange rates with the market exchange rates and their foreign exchange income acquisition. This policy constitutes a disconnection of the effect of the exchange rate and its fluctuations on stock returns. The change in the exchange rate from the import channel will affect the cost of intermediate goods, as a result, the prices of the companies' shares will change. For example, with the decrease in the value of the domestic currency, the import price of intermediate and capital goods increases and their import decreases. As a result, stock returns decrease due to the decrease in investment.
According to the results of the research, it is suggested to shareholders and lenders to pay attention to exchange rate fluctuations as a factor affecting stock prices in order to make correct and principled decisions of investing in companies' shares and granting credit. If the exchange rate fluctuations are directed in the right direction as a factor affecting stock prices, a more favorable environment for trade and investment will be provided; Because the exchange rate change from the import channel will affect the cost of intermediate goods, as a result, the stock price of the companies will change. For example, with the decrease in the value of the domestic currency, the import price of intermediate and capital goods increases and their import decreases. As a result, stock returns decrease due to the decrease in investment.

It seems that heavy economic sanctions have been the source of the instability of the unofficial foreign exchange market in the last two decades. This instability can be the result of the high resistance of turbulent shocks in the direction of damping towards the long-term average of the exchange rate, which shows the high persistence of the process. Such stability in unofficial foreign exchange market fluctuations can be caused by large changes in long-term variance due to structural breaks or the existence of long memory in exchange rate returns volatility. this paper seeks to provide a perspective of these two modes and their different aspects on the volatility of the unofficial exchange rate. For this purpose, the persistence of unofficial exchange rate volatility in three cases; We examined original data, original data with structural breaks and refined data from mass jumps and with structural break in combination with exponential (GARCH and IGARCH) and hyperbolic (FIGARCH models) autocorrelation functions. The results of this research show that the unofficial foreign exchange market is affected by collective jumps and sudden changes in the variance of returns. Also, based on the information criteria, the model compatible with the data is the FIGARCH(1,d,1) model with the original data and exposed to double structural failures in the variance, which indicates the extreme instability of the unofficial foreign exchange market and the impact of structural failures caused by sanctions mainly It refers to long-term volatility or unconditional volatility. This model clearly shows the unilateral withdrawal of the United States from the JCPOA and the return of unilateral sanctions after 2018. The uncertainty in Iran's unofficial foreign exchange market is more severe than in 2011.

Although most business models argue that exchange rate volatility increase uncertainty and risk, thereby reducing trade flows and imports; however, some other studies show the opposite results. Although many studies have been conducted on the exchange rate on trade and specifically on imports in the world, but the non-linear and asymmetric effect of exchange rate fluctuations and uncertainty on agricultural imports in Iran remains unknown. Therefore, this article tries to test the absence or asymmetry in possible photos of agricultural imports due to exchange rate changes in the Iranian economy. In addition, this study provides empirical evidence to advance policy-making in exchange rate management, as exchange rate uncertainties affect trade, and the results of this study provide information that can guide and develop the literature on the subject. The present study has examined the effect of market exchange rate uncertainty (unofficial) on the import of Iran's agricultural sector in the period 2001-2016. 

Exponential generalized conditional heterogeneity variance (EGARCH) model for deriving exchange rate volatility and conditional variance for estimating exchange rate uncertainty and two methods of Autoregressive distributed lag (ARDL) and Non-linear Autoregressive Distributed Lag (NARDL) to estimate the effect of volatility and uncertainty agricultural imports. 

The results indicate that the market exchange rate always has a positive and increasing effect on the value of imports in the agricultural sector (which is mainly input of agriculture production). In addition, examining the nonlinear relationship between exchange rate uncertainty and agricultural imports shows that positive shocks (increasing) of uncertainty has a decreasing effect on agricultural imports and negative shocks (decreasing) of uncertainty has an increasing effect on agricultural imports. Examining the linear relationship between exchange rate fluctuations and agricultural sector imports shows that current level of fluctuations do not have a significant effect on agricultural sector imports, but after a lag level (past period), it has a significant but positive weak effect on agricultural sector imports. Finally, by examining the long-term and short-term model between these two variables, no significant relationship was observed.Examination of the linear relationship between exchange rate fluctuations and agricultural sector imports shows that current exchange rate fluctuations do not have a significant effect on agricultural sector imports, but the previous period has a positive, significant and weak effect on agricultural sector imports. Examining the long-term and short-term relationships of these two variables, no significant relationship was observed. This is while the real free market exchange rate still has a positive effect on imports. However, this study on the effect of exchange rates is in line with most domestic and foreign studies and confirms their results.The results of research in modeling of effect of currency fluctuations on agricultural imports show that the effect of currency fluctuations on imports is symmetrical and currency fluctuations with a lag period have a positive and weak effect on imports. In the long run, the positive shock of currency fluctuations has not had a significant effect on agricultural imports. Also, 96% of short-term and long-term imbalances are adjusted in the pattern of the effect of exchange rate fluctuations on agricultural imports. Due to the high speed of adjustment, if positive currency shocks are managed, its negative effects will be adjusted after a period. Free market exchange rate has a significant and positive effect on the value of agricultural imports. GDP and prices and trade liberalization have a significant and positive effect on agricultural imports. 

Exchange rate uncertainty should be considered as an important issue by economic policy makers to reduce risk of trade flows. It is recommended to use exchange rate risk coverage tools, clarify government foreign exchange policies to reduce the risk of exchange rate fluctuations and uncertainty to ensure a continuous flow of agricultural import inputs. Exchange rate has always been considered as a key and important economic variable in policy making. It is recommended to use exchange rate risk hedging tools, clarify government foreign exchange policies to reduce the risk of exchange rate fluctuations and uncertainty to ensure a continuous flow of agricultural import inputs.In conditions of volatile and risky currency, the devaluation of the national currency (exchange rate increase) causes an increase in the value of imports in the agricultural sector, which indicates the management of foreign exchange expenditures on agricultural imports in line with government sovereign duties.The import of the agricultural sector reacts to the illegal market exchange rate rather than reacting to the uncertainty and riskiness of the exchange rate, and this high rate of adjustment, if positive exchange rate shocks are managed, its negative effects are adjusted after a period. In addition, high-risk currency conditions increase incentives and competition in the import of the agricultural sector, and the high sensitivity of agricultural imports to the illegal market exchange rate confirms this result. The behavior pattern of exchange rate (linear and nonlinear/ symmetric or asymmetric) and choosing a illegal market exchange rate instead of government and official exchange rates is effective in analyzing the impact of exchange rates on imports.Finally, there are many changes and fluctuations in the Iranian economy, it is suggested that, firstly, by formulating appropriate policies and strategies to stabilize the exchange rate and increase trade, the field of controlling and adjusting currency uncertainties be provided to witness this. Increase production, exports and improve the trade balance.

Digital currency analysis, especially Bitcoin, as the most popular digital currency, has received a lot of attention in recent years. The reason for this can be related to its innovative features, simplicity, transparency and increasing popularity. Since its introduction, Bitcoin has created great challenges and opportunities for policymakers, economists, entrepreneurs and consumers. The main purpose of writing this article is to investigate and analyze the fluctuations and returns of Bitcoin using univariate conditional variance heterogeneous autoregression models in the period between March 2012 and March 2019. In this framework, GARCH, GJR-GARCH, TGARCH EGARCH and GARCH-M univariate GARCH models are used. The results show that the best model for risk assessment in univariate GARCH models is GARCH-M model, because the liquidity risk predicts the Bitcoin price index with less error than other univariate models. Also, the results obtained in the EGARCH model show that there are no leverage effects in Bitcoin rate changes and the estimated model is a symmetric model. Examining several other univariate GARCH models also showed that the price of Bitcoin has symmetry in positive and negative news, this means that positive and negative shocks have the same effect on the price of bitcoin.

Instability and Volatility in economic growth will cause significant changes in the economy and its variables. Therefore, examining the cause of Volatility and instability in economic growth can eliminate or improve their effectiveness. In this study, using by vector Auto-Regression model, the relation of economic adjustment policies and instability of economic growth during the period 1360 to 1397 have been investigated. For this purpose, the annual fluctuations of economic growth were calculated using the Exponential Generalized Auto Regressive Conditional Heteroskedasticity and the effects of the three policies of privatization, trade liberalization and financial liberalization were measured. The results of this study showed that financial liberalization variables have the lowest (0.6%) and trade liberalization variables have the highest (21%) share on the instability of economic growth. Also, examining the rate of growth instability response to restructuring policies shows that these policies are not compatible with each other so that trade liberalization policy reduces instability and privatization policy increases Economic growth will be stable in the short and long term.

Nowadays, the capital market is one of the key economic sectors closely linked to other sectors, especially the monetary and banking. On the other hand, maintaining the stability of the capital market is a major concern for any economy. The financial crisis of 2008 has challenged the role of central bank on financial stability. In this regard, present research examine the effect of central bank independence on stock market volatility as a measure of financial instability in Tehran Stock Exchange from 1991 to 2019.In this regard, the stock market volatility series are generated utilizing the GARCH model and then the Autoregressive Distributed Lag (ARDL) model is estimated. Next, ARDL bounds testing for co-integration is employed and finally long-run relationship is estimated. The research findings show that the Central Bank Independence has a positive and significant effect on the volatility in Tehran Stock Exchange.However, move towards the reduction of the central bank independence does not seem reasonable due to its inflationary consequences.In this context, by maintaining the central bank independence from one hand, and trying to increase the central bank transparency on the other hand, the two goals of price stability and financial stability can be achieved simultaneously.

The main purpose of this study is to investigate the relationship between Iran’s heavy crude oil price returns and volatility dependence using the Copula-based quantile model (CQM). CQM is an efficient tool for analyzing nonlinear time series models as it has no need for initial assumptions.  We use monthly data from January 1990 to December 2019. We use the Hadrick-Prescott filter to calculate oil price fluctuations and use quantiles in both quartile and percentile form. The Kolmogorov-Smirnov test and the descriptive statistics confirm the fat-tail distribution of the variables.  It is thus not possible to calculate a direct relationship between crude oil price return and volatility. Based on the results of CQM estimation, a positive and significant relationship is verified between crude oil price volatility and returns in quantiles (0.05, 0.1, 0.2, 0.25, 0.3, 0.8, 0.9, and 0.95) which relate to periods of instability and crisis (war and economic sanctions). This finding can be theoretically explained through the channel of the precautionary demand effect on the oil price. The hypothesis of equality of variances was rejected within different quantiles based on ANOVA test result. Moreover, there is a significant relationship between one-period lag of oil price volatility (Xt-1) and oil returns within different quantiles. Using these results, investors can more effectively manage the risk of investing in the oil market as well as other financial assets related to the oil market.

Abstract In Iran, oil supplies the needed fuel and is the main source of foreign exchange earnings. Thereby, any volatility in oil prices will affect Iran's foreign exchange earnings at first and economic growth through time. This study, using Structural Vector Auto Regression (SVAR) model, investigates the effects of oil price volatility on economic growth of Iran through some institutional, monetary and financial variables during the period 1981-2017. The results show that the impulse of oil price volatility has a negative reaction from the growth of production. The index of democracy's reaction to the oil volatility is negative and, given its direct relation to production growth, overall production growth is reduced. Similarly, as for the government expenditures, it leads to reduced production growth. But the M2 has a positive reaction to the volatility of world crude oil prices and also has a positive effect on the production growth in the short run. The results also show that the most important variable affecting production growth changes in both the short and long run is the impact of government expenditures changes. Then, for achieving sustainable growth and using private sector dynamics, the assignment of public sector companies to the private sector based on the Article 44 of the Constitution should be followed.

Each financial institution faces different types of risks, with three of the most important risks in the banking system being credit, market and operational risks. In order to manage risk, sufficient capital must be allocated. One of the common ways to calculate the capital needed to deal with these risks is to calculate the capital proportional to each risk and then the algebraic sum to obtain the total capital required. However, many recent studies of financial institutionschr('39') risk calculations have also considered the correlation between risks. Therefore, the purpose of this study is to compare the credit and market risk data, combine these two risks together and then calculate the capital requirement in the Iranian banking system to face two cumulative risks. In order to integrate these two types of risks with different statistical characteristics, the Copula function is used. Also, for each of the two risks, the associated risk factors are taken into account and their dynamics are modeled and used in the design of the desired model and to obtain the final distribution functions.

The main objective of this study is to investigate shock spillovers and volatility over the selected indexes of Tehran Stock Exchange including the automotive and parts manufacturing group, banking group and oil products group in the period of 13th December, 2008 to 21th November, 2017. In order to that, MS-VAR model and Asymmetric BEKK have used. The results showed evidence of standard leverage in both regimes, as The results in the zero-order regime indicate the interaction of the Shocks and volatilities of each group on the Shocks and volatilities of other groups, and the past volatilities of each group relative to the past Shocks of that group contributed to the current volatility of that group in the zero-order regime. The results in first regime also showed that the news of the oil products group did not have any significant effect on the volatility of the automobile group, and vice versa. While Shocks transferring between banking groups and petroleum refineries, and between automobile group and banking groups are two-way. Also, the volatility of the banking group affects the volatility of the oil products group and volatility spillovers between petroleum product groups and automobile group is one-way.

The main aim of this study is to investigate the effect of exchange rate uncertainty on trade balance between Iran and countries which are major  trading partner of Iran, using the EGARCH method and the ARDL model (to examine the coherency and short- and long-term dynamics of the model). The data used in this paper includes quarterly data in the period of 1995 to 2017 for the real effective exchange rate, imports and exports of Iran (trade balance is between Iran and the main countries that are considered as trading partners of Iran, including China, Emirate, Germany, South Korea, and Turkey), real GDP of Iran, and real GDP of the main trading sides of Iran. The results demonstrate that, according to the model variables in the short and long term, in the case of changing in exchange rate, the trade balance of Iran versus other trading countries experience different variation, depending on the amount, volume and type of goods that are in business.

The exchange rate as an important macroeconomic variable affects various economic sectors from different aspects. This study aims to determine the effects of exchange rate shocks on the performance of economic sectors of East Azerbaijan Province. To this end, first exchange rate shock is calculated using a non-linear Markov-Switching (MS) model and is included as an explanatory variable in the final model. To estimate the nonlinear model based on the maximum likelihood function, a MS model with two regimes and a pause, i.e., MSIH (2)-AR (1), is selected. Then, a panel data model with varying coefficients is estimated by pooled mean group estimator (PMGE). The model is used to analyze the effect of uncertainty in real effective exchange rate on value-added of 15 economic sectors of East Azerbaijan Province over the period 2000-2013. The results indicate positive and significant effects of capital, labor and the exports on value-added of economic sectors. Among the 15 districts of the province, exchange rate volatility has a negative and significant influence on value-added and production of 4 out of 15 sectors. The results call for paying more attention to exchange rate volatility and adopt effective policies to remove its adverse effects.

The special features of the cryptocurrency have raised them as the future money of the global economy, while the monetary nature of these cryptocurrency has been questioned. In the economic literature, three main functions of money are considered as: (1) a medium of exchange, (2) a unit of account, and (3) a store of value. In this research, it will first attempt to address the history, nature and types of digital, virtual, and crypto money in the monetary system of the countries, and then, by modeling the exchange rate fluctuation of the selected cryptocurrencies, the Euro-Dollar and Gold with the GARCH family models, their monetary functions will be investigated. At the current time, it appears that the fluctuations of these types of cryptocurrency and the widespread inadequate use of them in micropayments, their monetary functions are seriously skeptical and therefore the use of money does not seem to be correct for them right now. With the advancement of technology and more people's familiarity with the advancement of technology, the depth of the cryptocurrency market could be increased, reducing their fluctuations and increasing the use of micro payments, and as a result, their money functions are expected to become more prominent over time.

Bitcoin was introduced as a pioneering cryptocurrency when the global financial markets were in crisis. The decentralized financial system of Bitcoin needs to have monetary properties such as being a medium of exchange, account of value, and store of value to become a monetary unit for financial transactions. The biggest obstacle Bitcoin currently faces or such a performance is its price volatility. This study examines the limitations of the Bitcoin system for interpreting the scope of inherent financial and security risks. In this regard, a GARCH model (1,1) has been used to analyze bitcoin volatility with respect to macroeconomic variables in countries where bitcoin is traded most. This study explores how the Bitcoin system can inherently increase financial risks under policies of influential countries such as the United States.

 

Internationalization of financial markets has caused what is happening in a country to be felt quickly in other countries. This affects the returns and risks of securities listed in the stock exchange; therefore, it is necessary to identify and analyze the relationship between stock markets properly. For this purpose, two goals are pursued in this paper; investigating the impact of the Indian and Turkish stock markets on the Iranian stock market, and investigating the effect of the Iranian stock market on the stock markets of India and Turkey. Theoretical Framework
The past decade has experienced financial and economic crises affecting economic development and evaluation principles. Due to the turbulence of the crisis, financial analysts and market participants feared that the overflow of the crisis into other economies might boost instability in global financial markets. Experience has shown that the effects and the extent of the spread of crises vary in scope and quality. For example, the financial turmoil in the Turkish stock market in 2001 was completely independent and had no impact on other markets (Desai, 2003), while Mexican and Asian crises had regional implications (Glyctic & Rose, 1999). In contrast, the Russian financial crisis of 1998 increased the volatility of global security of markets with enormous adventures (International Settlement Bank, 1999).
Today, financial markets are moving towards integration more than before, and countries have close economic relations in addition to their cultural and political ties. This is in many respects positive, but it also brings about many changes in the financial and economic system of countries (Ahmadzadeh, Heydari & Zolfaghari, 2012).
According to experts, since the recession in the United States and European countries, which led to bank failures and subsequent downsizing in the economy of these countries, the demand for energy and oil will reduce world oil prices. Some countries (e.g., oil-dependent economies) will face with lots of problems. At the outset of the crisis, it was a misconception that Iran would not take any effect from this crisis and could even be an ideal opportunity for the Iranian economy, but over time, the effects of the crisis put new challenges to the Iranian economy including a dramatic drop in oil revenues, a recession in the global market, decrease in non-oil exports, and consequently, drop of Tehran’s stock market.
The purpose of this paper is to examine whether fluctuations in the stock market of countries with which Iran has a good economic relationship is transferred to the stock market of Iran. For this purpose, two goals are pursued in this paper; investigating the impact of the Indian and Turkish stock markets on the Iranian stock market, and investigating the effect of the Iranian stock market on the stock markets of India and Turkey.

In this regard, this relationship is examined as Couples between the stock market of Iran and stock markets of Turkey and India. In this research, which focuses on the fluctuation modeling in the stock market of Iran and two Asian stock markets, a multivariate GARCH model has been developed which is used to examine the transmission of fluctuations between price indices of Iranian stock market, the Turkish stock market and the Indian stock market. The relationship between stock markets of Iran, Turkey and India has been evaluated using daily stock price data for the period 2007-2013 and the BEKK-GARCH model (Angel & Keroni, 1995).

The results show that the domestic markets with one-period lagged residual have a direct effect on all three countries. Regarding the domestic markets, the coefficients of ARCH and GARCH are significant for all three countries. This means that the fluctuations of the stock market index of the three countries of Iran, India and Turkey have a statistically significant relationship with previous fluctuations; however, no relationship between the Iranian stock market and the stock markets of India and Turkey was found. In other words, there is no apparent fluctuation transmission from the stock market index of Iran to Turkey, and vice versa. With respect to the Indian Stock exchange, the same results were achieved.
Although the international transfer of stock market volatility may affect the decisions made by the firm's capital budget, investors' consumption decisions, and other business cycles, under such circumstances, it may be argued that because of the insignificant relationship between the Iranian financial market and the global markets, the possibility of a crisis spreading from the Iranian economy to world markets is not possible, but there is still concern about the impact of the global economic crisis on the Iranian economy. Perhaps, its direct effect is to reduce global demand for crude oil, which will increase the pace of the global crisis in the Iranian economy, given the strong dependence of Iran's economic budget on oil revenues.

This research analyzes spillover effects of financial volatility among three international markets: Gold, Stocks and Foreign Exchange. We use the logarithmic returns of the assets - ounces of gold, the euro-dollar exchange rate and America stock index S&P500- from the first business day of 2000 until 1/12/2014 in order to identify the relationship between these three international markets. Identification returns transmission between markets is provided by using Vector Auto Regressive (VAR) model. Volatility spillover effects could be measured by the Multivariate Generalized Auto Regressive Conditional Heteroscedasticity (MGARCH) models. We use VAR-MGARCH model to identify information spillovers between three markets and introduce value at risk in order to measure portfolio risk. We estimate the value at risk of portfolio relying on the parametric approach at 99% confidence level for the forecast horizon of one day with two rolling windows that included 500 and 750 observations. In the first step the adequacy of predictions is tested by unconditional and conditional coverage tests. Then the adequacy predictions are ranked by Lopez loss function, Total accumulated losses and Sener loss function. The empirical results suggest that spillover effects are statistically significant and the VaR forecasts are generally found to be sensitive to the inclusion of spillover effects in any of the multivariate models considered. Ignoring this sensitivity is resulted in overestimation of the portfolio’s value at risk and, therefore, lead to inefficient allocation of resources to cover the risk of the asset portfolio.

Undoubtedly, the financing structure in each country's economy is considered to be the main element of the economic system of that country, because the life of an economy depends on its production and growth in its various fields, and its production and growth will not be realized without the required financial resources. The task entrusted to the economic system of the country is within the framework of its financing structure.
According to some economic experts, in Iran, the state budget, private sector savings and external resources are three determinants of financing sources. This means that active enterprises in various fields of production can pay for these resources to cover their needs. The government budget as one of the sources of financing firms due to dependence on oil revenues, can not be a powerful stimulus to sustain economic growth in the country. With regard to foreign sources, because of the sanctions, there can be no special account on them to finance various production sectors. Thus, it can be concluded that in the current economic conditions, the only possible option for financing firms is private sector savings; which can be equipped with the capital market and the money market (i.e., banks). Therefore, given that turbulence or fluctuations in inflation is one of the challenges in the banking system, what is highlighted in this paper is the uncertainty associated with inflation, and with the amount of bank loan facilities, and the facilities that most small and medium-sized enterprises have need to survive in the current state of the economy. Specifically, cheap bank facilities are referred to as facilities that are used by low-cost bank's resources for applicants.
Considering the importance of the banking system in the financing structure of firms and also need of small and medium firms for cheap banking facilities, and the bank's actions in the face of fluctuations of economic variables such as inflation, in order to maintain bank's financial strength, it seems that the study of the effect of macroeconomic variables on the performance of the banking system of the country has great importance.
Since developing countries, including Iran, have a high degree of uncertainty in macroeconomic variables. And this uncertainty also affects the decisions of bank officials, this paper examines the relationship between the uncertainty of inflation and Gharz-al-hassane facilities paid by commercial banks, in the form of a two-variable GARCH model using monthly data for the period of 2005-2014.
There are several methods to assess uncertainty and volatility in variables, but the most commonly used method in most econometric studies is the use of GARCH patterns. This method, proposed by Bollerslev (1986) is a modeling based on variance of variables over time.
GARCH patterns are categorized in a general classification based on the number of variables in the pattern, into univariate patterns and multivariate patterns. Single-GARCH patterns have limitations that make them difficult to use; one assumes that the conditional variance of each series is independent of all other series. In addition, in this type of models, covariance between series is not considered as an important factor of volatility of variables. These limitations make these patterns in many cases unrecognizable. The multivariate GARCH patterns can potentially overcome the deficiencies and defects of single-variable patterns. Multivariate patterns are very similar to single-variable models, and hence their estimates are similar to simple GARCH-single-variable patterns. However, in addition to the previous equations, there are certain equations for expressing how covariance moves over time (Heidari & Bashiri, 2011).
The first type of GARCH multivariate patterns is the Vech (q, p) pattern introduced by Bollerslev, Engle and Woldrige (1988). In 1991, another class of Vech (q, p) was introduced by Baba, Engle, Kraft and Kroner (1991) which became known as BEKK. This pattern has an interesting feature that, by applying several constraints, the variance-covariance matrix is a positive and definite condition. The problem with previous GARCH multi-variable protocols, including DCCs, is that they are not compatible; therefore, in order to avoid inappropriate results for estimating the conditional mean, variance, and variance of variables of inflation and facilities of the borrower, we use the cDCC model of MGARCH (1,1).
The results from the cDCC model estimation show that the uncertainty of inflation on the amount of Gharz-al-hassane facilities had a positive effect; which was not statistically significant at 5% level. On this basis, it can be concluded that with the increase of inflation, which is a depreciation of the money value and consequently a decline in the purchaser's purchasing power, the amount of Gharz-al-hassane loans has also increased. This is while expected in inflationary conditions, people withdraw these deposits or convert into long-term deposits. In the case of banks, it is also expected that by increasing inflation and rising money prices, and applying incentive policies to attract more long-term deposits instead of Gharz-al-hassane deposits, as a result, the amount of Gharz-al-hassane funds will be reduced and the amount of bank facilities will be lowered from these sources. However, the results indicate inverse of this issue in the selected time frame. It is a result that can prevent the adoption of false policies by the banking authorities. Thus, the banks are aware of the positive correlation between the inflationary fluctuations, that are increasing in inflation in the Iranian economy, and the commercial loans granted by commercial banks, withdrew its previous policies and put new policies in place to keep their capital under inflationary conditions.
As a suggested strategy, banks can use this in the context of the inflationary period in which some firms and households suffer from a drop in supply and demand due to rising prices, in order to adjust the business cycles; Thus, during this period, the resources of its Gharz-al-hassane deposits, which have not been reduced due to inflationary fluctuations, will be provided to this sector of enterprises and households. In this way, firms can continue to produce, and households are also buying power, both of which are a step towards more production and prosperity. On the other hand, the banks themselves have received a fee from the facility, and have also made a contribution to the investments made and can partly offset the depreciation of their finances during the inflationary period.