Karim Eslamloueyan; Sara Mehralian
Volume 20, Issue 65 , February 2016, , Pages 1-36
Abstract
Using a Markov Jumping Linear Quadratic (MJLQ) method, this paper examines the impact of financial uncertainty on monetary policy in Iran in the context of a new Keynesian model. This model allows us to study the impact of financial uncertainty on inflation and output gap. We allow the economy to switch ...
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Using a Markov Jumping Linear Quadratic (MJLQ) method, this paper examines the impact of financial uncertainty on monetary policy in Iran in the context of a new Keynesian model. This model allows us to study the impact of financial uncertainty on inflation and output gap. We allow the economy to switch between normal and abnormal states. Our model is estimated in two stages. We first estimate the parameters of our normal model by using maximum likelihood method. In the next stage, we use the parameters obtained in the first stage and Apply Metropolis-Hastings random walk method to estimate the parameters of our MJLQ model. This allows to investigate the reaction of key variables to shocks in inflation, output gap and interest spread. We find out that the reaction of monetary policy to these three shocks under certainty case in the abnormal time model is stronger than those under uncertainty case. This finding might have important policy implication for authorities when conducting monetary policy in the presence of financial frictions.
Morteza Khorsandi; Karim Eslamloueyan; Hossein Zonnoor
Volume 17, Issue 51 , July 2012, , Pages 43-70
Abstract
The main goal of this paper is to derive an optimal rule for monetary policy in Iran. To do so, we estimate the monetary transmission equations and derive the optimal rule by using the dynamic programming method. Our dynamic optimization problem is to minimize the central bank's loss function subject ...
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The main goal of this paper is to derive an optimal rule for monetary policy in Iran. To do so, we estimate the monetary transmission equations and derive the optimal rule by using the dynamic programming method. Our dynamic optimization problem is to minimize the central bank's loss function subject to the transmission mechanism equations. We have modified our loss function to include inflation persistence as well. Using the growth rate in broad definition of money, M2 as our control variable, we estimate the transmission mechanism equations and derive the optimal monetary rule. Our findings indicate that the optimal monetary policy rule can decrease welfare losses and hence is a welfare improving policy. This means that the use of monetary rule is superior to discretionary policy in the case of Iran.
Karim Eslamloueyan; Emad Aldeen Sakhaei
Volume 16, Issue 46 , April 2011, , Pages 61-76
Abstract
Using panel data error correction models, we investigate the short- and long-run causality between financial development and economic growth in the Middle East. Three different indicators are used to measure financial developments. Generalized Least Square (GLS) method with cross-section Seemingly Unrelated ...
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Using panel data error correction models, we investigate the short- and long-run causality between financial development and economic growth in the Middle East. Three different indicators are used to measure financial developments. Generalized Least Square (GLS) method with cross-section Seemingly Unrelated Regression (SUR) and fixed effects in cross dimension is used to estimate the models. Our estimation results suggest that there is bidirectional causality between financial development and economic growth in both the short- and long run. The result underscores the feedback between finance and growth and hence advocates the third view that emphasizes on mutual causality between financial development and economic growth. In other words, finance can promote growth and in turn output growth will enhance financial development in the Middle East. This result can have important policy implications for both policymakers and international institutions.
Karim Eslamloueyan; Hashem Zare
Volume 8, Issue 29 , February 2007, , Pages 17-46
Abstract
This paper uses a quarterly data to study the effect of the main economic variables on the stock price index in Iran over the period 1993:3–2003:2. An autoregressive distributed lag (ARDL) approach to cointegration analysis is used to study both short- and long-run movements of stock prices in ...
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This paper uses a quarterly data to study the effect of the main economic variables on the stock price index in Iran over the period 1993:3–2003:2. An autoregressive distributed lag (ARDL) approach to cointegration analysis is used to study both short- and long-run movements of stock prices in Tehran stock market. The explanatory variables include money supply, production level of large manufacturing companies, and the ratio of domestic to foreign price level, exchange rate, oil price, gold coin price, and housing price index.
The results show that there is a long-run equilibrium relationship between the variables. According to our finding, the ratio of domestic to foreign price levels, the price of housing and the gold coin price index have positive impacts on the stock prices. Exchange rate and money supply have significant negative effects on the stock price index in Iran. However, we found that the production level of large manufacturing companies has not affected the stock price index. The result of our error correction model indicated that 54 percent of deviation of the stock price from its equilibrium path is corrected each period.
Karim Eslamloueyan
Volume 6, Issue 19 , July 2004, , Pages 1-29
Abstract
Using an Autoregressive Distributed Lag approach & cointegration analysis, this paper examines the impacts of anticipated and unanticipated shocks to official exchange rate on black market exchange rate premium in Iran for the period 1980:1 – 2001:1. Following Barro (1977), Hoffman et al. (1984) ...
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Using an Autoregressive Distributed Lag approach & cointegration analysis, this paper examines the impacts of anticipated and unanticipated shocks to official exchange rate on black market exchange rate premium in Iran for the period 1980:1 – 2001:1. Following Barro (1977), Hoffman et al. (1984) and Pozo and Wheeler (1999) a two-stage model is developed to study the long-run movement of black market premium. In the first stage, we construct a forecasting equation for the official exchange rate. The predicted values of official exchange rate obtained from this equation are used to measure the anticipated shocks. The residuals of the estimated forecasting model are used as a measure of unanticipated shock to official exchange rate. In the second stage, we regress the black market premium on anticipated and unanticipated shocks derived in the previous stage. The results indicate that both anticipated and unanticipated shocks to official exchange rate have a significant negative impact on the black market premium in Iran. It is found that an unanticipated increase in the official exchange rate has a greater impact on the black market premium than the anticipated one. Using dummy variable technique to study the possibility of structural break in the premium movement, the paper finds that the policy of exchange rate unification of 1993 has changed the intercept and the slope of the premium equation. This means that this policy has caused a structural change in the premium movement. More specifically, the intercept has decreased and the slope has increased dramatically after the unification. Indeed, the anticipated devaluation of official exchange rate has had a positive impact on the black market premium between 1993 and 1995. Finally, the cointegration tests verify the existence of a long-run equilibrium relationship among variables.
