ECONOMIC STRATEGY
Year:2014 | Volume:3 | Issue:12|Papers Count:7

Financial repressions, including profit-rate determination for both loan and deposits, high reserves requirement rate, and credit rationing have been imposed in Iran by financial sector for a couple of decades. Following Fry and Narayans models, this article studies the impacts of the repressions on investment and growth of agricultural and industrial sectors using a General Method of Moment (GMM) threshold level model. The findings are that the implementation of these models does not reject the McKinnon-Show hypothesis. However, there are significant differences between before and after threshold level growth and investment in both sectors. Furthermore, the results indicate that among the proxy variables, profit rate has more negative effect on growth and investment of these sectors. The study suggests that the policy-makers should avoid of financial repression after threshold level.

Exchange rate and its fluctuations are among the effective indicators of decision making about investment, choice of financing in enterprises as well as assessing the improvement of the business environment at each economy level. Exchange rate volatility can lead to increase of risk and uncertainty in financial markets and disturbance of the business environment. The balance sheet effect of exchange rate fluctuations affects the level of asset and debt of enterprises leading to increase of the cost of debt financed by foreign sources.The study covers both the theoretical and the empirical aspects evaluating the interaction between capital market indicators, and foreign exchange rate. The analysis uses monthly data for a period of 1385: 01 to 1393: 06.The results show that fluctuations of exchange rate in parallel market have had negative effect on financing from Tehran Stock Exchange Market. The effects of exchange rate shocks on such financing last at least for ten months.

A key challenge for macroeconomic policy is how to simultaneously manage exchange rates, interest rates and capital account openness. The basic assumption is that there exists a tradeoff among monetary policy independence, exchange rate stability, and financial market openness and that changing one component is necessarily associated with a corresponding change in a combination of the other two components. The phenomenon of selecting three indexes including exchange rate stability, monetary policy independence, and financial market openness is known as Mundell-Fleming structure or impossible trinity or trilemma hypothesi. The aim of this research is to investigate "trilemma hypothesis" in the Iranian economy during the period 1974-2012. Using rolling regression and new criteria, three indexes were calculated. The results indicated that the sum of the indexes is not equal to 2 and in any year and therefore the Trilemma Hypothesis does not hold.

Look east doctrine is an important approach in the foreign policy of the Islamic Republic of Iran. This approach was adapted as a policy priority, following a decade of disruption of diplomatic relationship with the United States of America as well as the intensification of EU sanctions against the Islamic Republic of Iran.Adopting this new approach, the IR of Iran has tried to safeguard its economic goals and objectives by abstracting the unipolar structure of the international system formed following the Cold War. China, as a new hegemonic power in the international system, has attracted the attention of Iran’s diplomatic apparatus, in order to strengthen Iran’s national interests in regional and international levels, by expanding the cooperation with this rich and powerful pole in international system. This article analyzes the extent the hegemonic structure of international system allows a coalition-building opportunity for Iranian diplomacy to establish strategic relations with China.The main question of the paper is to find the objectives of the IR of Iran in extending its strategic relations with China. The study uses an analytic- descriptive method based on the theory of power to test the validity of the hypothesis that the IR of Iran considers China as one of the suitable alternatives in the area economic strategic relationship.

Taxes and institutions are related to each other in different ways. Good tax system requires appropriate institutions that set the political, cultural and economic conditions and contexts to improve tax performance. Quality of governance is one of the criteria to determine the quality of institutional environment and therefore the factors affecting the tax performance. In this study, we investigate the effect of good governance indicators on tax capacity as a measure of tax system performance in countries of the MENA region (Middle East and North Africa) during 1996 - 2012. The results suggest that good governance, degree of trade openness, degree of monetarization, foreign debt, population growth and lagged rent revenue have positive effect and the log of GDP per capita has negative and significant effect on the tax capacity; whereas, political stability, quality of regulation and control of corruption have positive and significant effect. Other factors are not significant. The quality of rules and regulations is the most effective variable on the tax capacity.

This article analyzes the impact of Government budget composition on Poverty, human development and social welfare in Iran.The study uses a descriptive method and by applying the cause and effect and econometric method analyzes the effect of Government budget composition on social welfare during (1981-2013).The government expenditures are disaggregated into different types. The results reveal that public investments on health, education, social security, telecommunications, transportation and water have positive and significant impact on poverty reduction. On HDI, public expenditure on health, education and rural community development have positive and significant effect. Public spending on health, education, social security and telecommunications has most significant effects on social welfare. Any increase in per capita income will increase the quantity and quality of welfare. Direct assistance made to the NGOs in the welfare state increases the efficiency of government spending on welfare. The government spending of public safety has positive effect on welfare.As a result, spending on social sectors will benefit the poor than other types of expenditure.

Housing sector situation enhances economic booms and stagnations and the sector is deeply affected by financial problems. The research is analyzed the effect of exchange rate fluctuations on housing investment in Iran. Private investment for construction of new housing units in the urban areas is used as the indicator for housing investment. Using the data for a period of 1992 to 2013, the paper shows a negative and significant relationship between exchange rate fluctuations and housing investment. Any increase in foreign exchange fluctuations leads the housing investors away from construction sector and increases their preference for investment in foreign exchange market. A possible cause of such movement may be an expectation of future recession in housing sector and an expectation of higher return in the foreign exchange market.