Journal of Economic Studies and Policies
Year:2010 | Volume:6 (16) | Issue:1 (78)|Papers Count:8

This paper investigates monetary policy independency, as well as its weakness and the role of factors affecting it. It seems that because of interest rate determination in Iran's Economy which is irresponsive to nominal variable fluctuations, the role of central bank has been deviated from an active institute toward a passive one. For this purpose, Taylor rule was investigated for Iran's Economy using quarterly data. Based on the results, although the coefficient of interest rate is statistically significant, it is very small and close to zero. This shows that interest rate does not respond to the deviations of inflation. Considering the complexity in the structure of Iranian budget constraint and its severe dependency to oil revenue fluctuations, it is clear that the oil revenues have considerable impacts on fiscal policies and hence central bank and monetary policy are substantially influenced. Based on the results of this paper, the cyclical component of nominal money, monetary base components and prices are strongly contemporaneously correlated with oil revenues and at most after one period they respond to the oil revenues fluctuations. In the long run, based on co-integration analysis, price levels are substantially affected by budget deficit and net of central bank's foreign asset and both of them are correlated negatively in the  long run, as well as both of them are affected by oil prices. In addition, IRF shows that the responses of net of central bank's foreign asset, budget deficit, liquidity and price level to a positive oil shock are so similar to the realized fact in Iran's Economy.

Central banks regard the interest rate as a tool for achieving different economic objectives such as inflation targeting. Interest rate plays an important role in the economic structure of a country and given the dependence of other macroeconomic variables, such as the level of production and employment, and their effects on interest rate behaviors, so, the interest rate has been regarded by policy makers as a major instrument of monetary policy.In this paper, regarding the Iranian economic structure and on the basis of Sevensson’s model (1997), the optimal interest rate has been computed with respect to the major goals of central banks. The solution to the model on the basis of some simplified assumptions shows that the real optimal interest rates are affected by the gap between inflation and inflation target, production gap, the inflation lag, and exogenous variables. Estimation of the model using Iranian economic data (1974- 2007) reveals that the relationship between inflation and the production gap as well as inflation and inflation gap is positive and significant. Furthermore, the production gap has a positive and significant relationship with the lag in the production gap, a negative and insignificant one with the real interest rate, and a negative and significant one with exogenous variables.Estimation of the optimal interest rate model shows that the production gap has a positive and significant effect on the nominal interest rate. The effect of exogenous variables on the nominal interest rate is positive and significant, and targeted inflation has a negative and statistically significant impact on the nominal interest rate. In addition, the results of this paper demonstrate that the effect of inflation and it's lag is not statistically significant on the nominal interest rate.

Usually the role of expectations in money demand function is raised. One of parameters that influences money demand is inflation and it reduces money demand level. Inflation in the economy is a function of other variables, including expectations. Inflationary expectations in the economy can be shaped as adaptive or rational. By this article, we test these concepts and show the function of money demand based on expectations, and report its estimations. As the results indicate the adaptive expectation describe better the demand function for money and it is a function of production level and inflation rate in Iran.

The state-owned banks in Iran have been experiencing crisis, but due to nationalization of banking system there has been no bank runs. In this paper, we identify the occasions of banking crisis in Iran using the money market pressure index and the Markov switching method for the period 1971- 2008. The results show that the banking system in Iran has experienced crisis in certain periods. In particular, the money market pressure index has been critical in periods such as the revolution, war with Iraq, after war reconstruction time, and the most recent extreme government control policy of the banks.

In this study we have reviewed the changes in oil price and its macro-effect on Iranian Economy, by vector-autoregressive (VAR) method with seasonal data for oil price and other variables in the above period. The result from the model of estimation and also interpretation of impulse response (IRFs) and variance decomposition (FEVDs), shows that there is a meaningful relation between oil and other variables. The government expenditure and money supply is highly affected by oil, and positive shock of oil price will weakens the tradable sectors and strengthens non-tradable  sectors in the economy. Also, through price increase of consumable imported goods and the increased cost of foreign input will positively and continuously affect the consumer price index. Due to dependency of internal production to import, the economy will face inflation which is caused by external factors.

Oil revenues constitute the major part of export revenues in OPEC countries. In regard to this fact that prices in oil markets have been very so swinging in the past four decades, identifying manner and severity of affecting oil revenues on inflation for economic policy making is very important. Topic of this paper is" The nonlinear effects of oil revenues on inflation in OPEC countries". We have used panel data during the 1983-2006 for OPEC countries in the research. The way which is applied for estimation is "Threshold error correction model". Estimations show that the oil revenue increase is significantly inflationary, and when oil revenue increase is upper than 45 percent threshold level, its effect on inflation will be more severe. This result confirms the main hypothesis of this research which asserts that relation between inflation and oil revenues is positive and nonlinear.

Along with increasing life expectancy, quality of life and high retirement age, it has been tried to prevent excessive pressure on labor through creating the early retirement conditions as one part of retirement systems besides working age reductions. The participation of middle-aged and adolescent people is affected by enforcing the early retirement laws The aim of this study is to identify the affecting factors on participation of old people labor supply and to give an answer to this question: does enforcement of adolescent early retirement schemes reduce the labor supply pressure and unemployment?Descriptive method using current population survey has been used to test the hypotheses in this research. The research findings indicate that in the studied sample, 54.9 percent of early-retirees and 52 percent of mature-retirees have not left the labor market. The regression tests show that reduction of working years raises the probability of reemployment of retirees. Thus, it can be said that enforcement of early retirement schemes do not fully result in exit of retirees from labor market. In the selected sample, 45.1 percent of early-retirees went out from labor market, and generally, there is only the possibility of labor replacement for them in labor market. So, considerable changes do not occur by exiting the old people from market and replacement of them. The early retirement has increased the probability of men presence and decreased the probability of women presence in labor market. The retirees having higher education degrees remain more than the others in the labor market and become re-employed. So, the early retirement has increased the specialization level in labor market.

For anybody who has a little knowledge about economics, the study of economic papers will be astonishing. By reviewing economic journal one wonders, "Is this economics or a branch of mathematics?" However, this is the present state of this branch of science. It seems that, to learn it one needs to know mathematics rather than culture, history, institutions and institutional structures. Indeed, the present state of economics is reminiscent of the motto of Plato's Academy, "Whoever enters here must know mathematics". Now it is important to ask, "Why did economics depend on so much to mathematics?", "Did mathematics provide a key to understanding of economic problems?", "Why do economists resort to mathematics?" These and other similar questions signify high interaction between mathematics and economics. By focusing on these questions, this paper will demonstrate two important issues. First, contrary to conventional belief, resorting to mathematics is not a reaction to Marx's attack on economics. Through the theory of labor value, but rather, such attitude enjoys a philosophical basis, according to which, economics is regarded as scientific only when it is based on mathematics. Second, resorting to mathematics has restricted the scope of economics and has led to the elimination of some very important issues and phenomena from economic analysis.