Iranian Journal of Economic Research

Abstract This paper investigates the impacts of an energy price increase on price levels, income distribution, consumer’ welfare and government expenditure. In doing so, it uses a static Input-Output approach in the context of the input-output table for Islamic Republic of Iran for the year 2004. An exogenous increase in energy prices, due to reduction in energy subsidies, increases the production costs and consequently increases the general price level. Such price increases, result in a consumer’ welfare reduction and affect the government expenditures. It defines a set of indirect utility functions, which then used to measure the change in welfare of households. A set of constant coefficients used to measure the increase in households’ budget and change in government expenditures. Two distinct scenarios defined for energy prices increase, the first is a once-for-all 100% increase in those prices, and the second scenario assumes a once-for-all complete elimination of energy subsidies in Iran.

Abstract Decreasing trend of gasoline real price accompanied with economic growth and increasing number of automobiles have resulted in  high consumption of gasoline in Iran.  The average growth rate of hidden subsidies in the recent years is amounted 8.5 percent, and  the size of gasoline subsidies has been more than government tax revenues for many years. The average growth rate of gasoline consumption has also been 10 percent in recent years. ,. The huge financial burden of imported gasoline and the amount of required subsidies have made it indispensable to make a serious change in the pricing policy of oil products. The main purpose of this paper is to evaluate the distortionary effects of gasoline price control on output, employment, prices, wages and income distribution, using a CGE model. Our findings show that, a 100% increase in the gasoline price will result in the increase of consumer’s and product’s prices and wage in short run, but it will decrease households’ income and the price of capital in the long run.                               

Abstract Investors in stock markets are concerned about the inflation effect on their returns. However, the impact varies based on investment horizons.  Since investors have different attitudes and diverse investment horizons, studying the relationship between inflation and stock returns in different time scales would have great implications for their investment. In this paper, we examine the Fisher hypothesis, which denotes a positive relationship between nominal stock return and inflation rate, using a wavelet multi-scaling method that decomposes a given time series on a scale-by-scale basis. The wavelet approach based on time-scale decomposition provides a valuable means of testing the Fisher hypothesis and resolves the problem of conflicting results in the literature. Our results show a negative relationship between inflation and the TSE returns in short-run horizon and a positive relationship in long-run horizon. 

Abstract Part of  harmful effects of inflation on the economy stems from the financial sector. This paper argues that inflation shifts resources from manufacturing sector to financial sector leading to an increase in the relative size of financial sector. This shift of resources can be viewed as a harmful effect of inflation, because if inflation were lower, the resources could be used directly to increase production of goods. Using Johanson's methodology and data of Iran in 1343-1385, we find that the relative size of financial sector is strongly affected by inflation. 

Abstract The index of economic well-being (IEWB) covering consumption, wealth, income distribution and economic security is a suitable composite index measuring welfare, growth and development at both partial as well as comprehensive levels .In this study the composite index has been proposed for the first time in Iran and the welfare trend has also been   measured for the available data period 1368-1382. In order to aggregate variables and welfare dimensions we have normalized data using the first year of the first development plan (1368) as the base year. In addition, to estimate the trend of total economic welfare index we have used a uniform weight (0.25) table for each of the four dimensions. The results show that the economic security and consumption were respectively the most important dimensions of economic welfare in Iran .Also, comparing the absolute as well as the relative changes in per capita income and IEWB we found that using per capita income as an index will overestimate the level of economic welfare in Iran. 

Abstract In this paper we analyze the three responses of monetary policy to bubble in housing prices. First rule corresponds to a monetary authority that does not respond to house price inflation. The second rule corresponds to a monetary authority that respond to overall house price inflation, and in third alternative is a policy in which a monetary authority responds to house price bubble. We use an ARDL model with quarterly data for Iran. The results reveal several practical monetary policy lessons. First، a monetary authority should generally respond to house price bubble because minimizes the loss function. Second، this finding holds even if a monetary authority cannot distinguish between fundamental and bubble house price behavior. Third, monetary authority should tighten when house price bubbles are inflating and should ease when house price bubble collapse.       

Abstract The increased growth of oil consumption, particularly in developing countries, has turned oil into a strategic commodity in the world. Therefore, identifying factors affecting supply and demand in oil market and the study of price changes  are of a great importance. In this article, we have reconsidered the Hotelling model for optimal extraction of non-renewal recourses with regard to the  resource effects and technological advances. The cost and demand functions for non-renewable resources are set up in a way to find  a stable  growth in a system of simultaneous equations of supply and demand. We have utilized data from OPEC in the period 1980- 2006 to test the model and the functions of supply and demand in a system of simultaneous equations using a  3SLS method. The estimation results indicate that  the growth rate of the oil price has remained unchangned over rather a long period of time, which is  consistent with the theoretical outcomes predicted by the model.  

Abstract The local and international environmental problems are one of the most important concerns for economists, politicians, and lawmakers. Therefore, an investigation of the relationship between economic growth and environmental pollution can be important ,because it may be used as a base for national and international environmental policies. In this study, a panel data approach was used to analyze the effect of economic growth, technical, preferential and political changes on the important air pollution factors in the 56 selected countries with different developments levels for the period 1995 - 2005.The results indicate that despite the positive effect of the economic growth on the environmental pollution, technological advances have played an important role in  the reduction of sulfur and nitrogen dioxide,and in improvement of the political indices in the reduction of  carbon dioxide as the air pollutant.  

Abstract A great deal of literature has examined the relationship between government size and economic growth. To investigate this relationship, this study applies a threshold regression model to test whether the Army curve exists in Iran as an oil exporting country. Five classification of government size include total government expenditure/GDP, government investment expenditure/GDP and government consumption expenditure/GDP, government expenditure financed by oil /GDP and government expenditure financed by tax/GDP. The result reveal that all classification except government expenditure finance by tax have a threshold effect and economic growth is maximum when government expenditure is between 23 to 30 percent of GDP.