Iranian Journal of Economic Research

Abstract This paper studies the impact of Rial's real devaluation and scale  variables (domestic and foreign real income) on Iran's trade balance using the Johansen-Juselius and ARDL methods for the period 1338-1383 (1960-2004).    According to co-integration tests results, trade balance variables, domestic and foreign income, and black market exchange rates are co-integrated indicating a long run equilibrium relationship among them. Moreover, all the long and short run coefficients have expected signs and are stable during the sample period. However, the official exchange rate is not able to explain trade balance fluctuations satisfactorily in this period. The results of co-integration tests reject the null of long run equilibrium relationship among trade balance, scale variables and official exchange rate. The diagnostic tests in the error correction models with official rate imply serious mis specifications as well. The study suggests the need to monitoring the black market rather than official exchange rate.

Abstract Modern location quotient method (MLQM) is used to generate regional input-output coefficients (RIOCs). It has a number of functions which one should take into account in generating RIOCs and for statistical testing. The prerequisite for such statistical testing is the availability of survey- based RIOCs. This then raises the following important question: In the absence of survey based RIOCs, is it possible to apply MLQM for generating RIOCs for country like Iran? If yes, how to test the derived coefficients statistically? To answer that, we propose a new method for statistical testing through minimizing total errors using Ghosh supply side model.  

Abstract Existence of unit root in logarithm of real GDP can be a sign of random walk with drift process in potential output. In this respect, the time growth rate of the potential output can be estimated as a proxy for productivity in state- space form. For this purpose, at first potential output and GDP gap have been simultaneously estimated with Kalman Filter algorithm. Then, the results of the potential output and production cycle have been compared with the results of Hodrick- Prescott and Baxter-King approaches. The three methods have confirmed the increase in the economic stability in recent years. To take into account the oil price shock effects on government income, we incorporate the productivity into the model as a random walk process. This makes it possible to estimate productivity time services for the period 1367 (1988):Q1-1384 (2005):Q4. Our findings show that productivity in recent years has enjoyed a slow but positive trend and is somewhat stable. 

Abstract The central banks holding of the international reserves serves as a means for financing the balance-of-payments deficit, but bears opportunity costs. Therefore, the optimal level of the international reserves is one of the monetary authorities’ major concerns. The special economic conditions of the country, such as the severe dependency of the economy on the oil exporting revenues, lacking of the necessary flexibility in the foreign exchange market, commercial limitations and controlling the capital flows, limited access to the international financial markets, poor management of the foreign debts, and various national and international shocks to the economy in recent years have made the determining of the optimal level of the international reserves very important to the Iranian economy. In this paper, we use the Frankel-Jovanovic model which is based on the Bamol’s and Tobin’s buffer stock model and apply dynamic optimization and GARCH model to determine the optimal level of the international reserves of Central Bank of the Islamic Republic of Iran for the period 1961-2004. Our findings show that the real reserves level, except for the periods of high oil revenues,  have been lower than the optimal level. 

Abstract Over the final two decades of the 20^th century, a number of formerly industrializing economics achieved levels of innovative capacity commensurate with or greater than those of some economies that were historically more innovative. In this paper, I discuss the conditions and factors affecting innovative capacity. The framework of National Innovative capacity (NIC) can explain the difference in innovation and economic growth among countries. NIC is the ability of a country to produce and  commercialize a flow of innovative technology over the long term. NIC depends on the strength of a nation^’s common innovation infrastructure, the environment for innovation in its leading industrial clusters, and strength of linkage between these two areas. I use this framework to find the productivity of Iran NIC. The results of the estimated equations imply that there is a weak linkage between innovation and NIC.  

Abstract The main objective of this paper is to estimate the relationship between the real wage rates and labor productivity in the industrial sector of Iran over the period 1979-2002.  The empirical results obtained form the ARDL estimation model confirm a long run (co-integrated) relationship between the real wage rate and the productivity along side with other variables in the model where the labor productivity has a positive impact on real wage rate, but is not significant statistically. Also, the Granger test demonstrates that there is no causality link between these two variables. In fact, other factors, including the government domination on the major industrial units (by setting an administrated wage rates), labor laws, and lack of effective labor unions have led to an inflexible wage rate system.  

Abstract The main objective of this study is to assess the effects of monetarypolicies on consumption behaviors of rural households in Iran, using the Euler equations and OLS and IV(Instrumental Variable) estimation methods. Results show that there is no relationship between consumption growth of rural households and interest rate. In other words, there are no interactions between monetary policies and rural households' consumption. Also, rural consumption was limited more by credit availability than interest rate. Furthermore, precautionary savings is noticeable among rural households.

Abstract There are several definitions and measurement of poverty .In this study we use the relative poverty line by using and basic groups of consumption pattern including foods, cloth, housing, health, transportation, recreation and education and others. We calculated the relative index, relative gap income poverty inequality index and Kakavani in 1995 were 52%, 39% 33% and 17%, respectively and in 2004 to 17%, 33%, 16% and 3% which shows a considerable improvement.