Iranian Economic Review
Volume:25 Issue: 64, Summer 2021

Determining the extent to which the bakeries of Gonabad, Iran have succeeded in the optimal use of certain resources and to explore the possibility of production increase with a certain set of production resources and factors, the technical efficiency of bakeries in this city was estimated. Data were collected from 98 bakeries in Gonabad using simple randomization in 2016. To accomplish research objectives, the stochastic frontier production function and technical inefficiency were simultaneously estimated by the Cabb-Douglas production function. The results showed that the average technical efficiency of the bakeries is 71.12% influenced positively and significantly by the variables of flour and labor. Also, bakers’ age and experience had a negative relationship with their technical inefficiency, but their educational level had no significant effect. On the other hand, the difference between the minimum and maximum technical efficiency was calculated to be 72.75%. According to the results, experience is a requirement to enhance production and efficiency.

Iran has faced oil and banking sanctions since 2012. Following the sanctions and instability of the exchange rates, the Rial has sharply lost its value. Rising economic unrest has widened the gap between the official exchange rate and parallel market rate. However, the depreciation of Iran’s Rial does not show a uniform trend, and the decline path has been complicated. We know that sanctions against Iran have created new expectations, concerns, and attention. Google Trends has provided an analytic tool for measuring and monitoring people’s expectations based on their Internet search data. This study attempted to analyze and model the exchange rate trends in Iran using sanctions-related expectations extracted from Google Trends. The Google search index (GSI) of the sanctions demonstrated the agent’s expectations. Monthly data and the autoregressive distributed lag (ARDL) method were used for estimation. The results indicated a significant and positive impact of GSI on the unofficial exchange rate (UER) and just a positive impact on the real unofficial exchange rate (RUER). We can conclude that the effects of sanctions appear partly through changes in people’s expectations that can be extracted using GSI. Moreover, the difference in inflation showed a significant positive effect on the market exchange rate in Iran. Thus, an improvement in the expectations through reducing the international tensions and a perspective shift can strengthen the Rial exchange rate. Moreover, the policymaker can control the volatility and depreciation of the exchange rates in Iran by restricting the M2 growth through an appropriate long-run monetary policy.

In international trade relations, the US dollar is prominently used for invoicing, and not only for a trade involving the United States but also for other countries, it is so-called vehicle currency. This paper analytically explores the optimal policy and its implications for welfare in a two-country general equilibrium model with non-tradable goods, considering various assumptions about export invoicing currency. Fixing invoicing currency for one country’s exports, compared to the other country’s welfare under the two possible invoicing currencies, is this paper’s main analysis. This paper derives an analytical condition under which both vehicle currency country and the non-vehicle currency country prefer vehicle currency pricing over producer currency pricing. Finally, this paper uses the choice theory of vehicle currency to explore its role in Iran’s international trade. The Empirical findings show that for each value of tradable goods weight, if the bias parameter toward domestically-produced goods for foreign households equals 0.33, then Rial (home country currency) is used as a vehicle currency.

There are clear signs of climate change in Africa, while the continent has limited economic and financial muscle to generate clean, low-carbon, greener, and energy-efficient production activities needed to improve environmental quality. Hence, this paper examines the impact of structural change and financial development on carbon dioxide emissions and tests whether the EKC hypothesis is supported for 31 sampled Sub-Saharan African countries between 1990 and 2017. The study utilizes the pooled mean group heterogeneous panel data. The study finds that the EKC exists for all income groups. The deterministic role of financial development is observed for low and lower-middle-income countries while the influential role of financial development was obtained for upper-middle and high-income countries. Structural change, industrialization, and agriculture increase the level of CO2 in upper-middle and high, lower-middle, and low-income countries, respectively. To minimize climate change in Africa, there is a need to invest in energy-efficient industrialization and agricultural practices which could be achieved through targeted financial support.

This paper is to study the stochastic convergence toward cross-average across 50 US states over the period from 1976–2018. To the end, we apply the quantile unit root test and several conventional linear and nonlinear unit root tests. While conventional unit root tests reject the stochastic convergence hypothesis for most of the states, we have found results in favor of stochastic convergence for 41 out of 50 states using the quantile unit root tests. In addition, our results indicated that the states exhibited different stochastic behaviors in various quantiles. In the states, which have had an unemployment rate less than cross-average in the boom period, negative shocks to the unemployment rate have had long-lasting effects, and shocks are divergent from the cross-average unemployment rate. But in a recessionary period of economics, positive shocks to the unemployment rate result in convergence toward cross-average, but have transitory effects and disappear in the short run.

Although financial development facilitates economic growth, inflationary conditions can negatively affect the relationship between financial development and economic growth. This paper studies the threshold inflation rate for the effect of financial development on economic growth by using the panel smooth transition regression (PSTR) model and the data from eight Islamic developing countries of the D-8 Group over the period 1990–2017. Results show an asymmetric relationship at different levels of inflation between financial development and economic growth. The inflation rate will be transferred at the smooth transition speed of 0.93 bypassing the threshold of 11.88 from the first regime to the second regime, which is a nonlinear relationship in the model. Higher inflation levels reduce the motivation of the investor and consequently reduce the investment. On the other hand, the reduction in the productivity of production factors brings about the negative effect of financial development on economic growth. Thus, countries with a higher inflation rate threshold must have access to an efficient financial system to achieve low inflation rates.

Given that the Iranian economy is affected by different fluctuations and innovations, it is important to estimate a measure of macroeconomic uncertainty, which represents aggregate level of uncertainty in economics. This study provides a comprehensive time series measure of macroeconomic uncertainty for Iran, estimated separately for different forecast horizons. Moreover, it provides superior econometric estimate of time-varying macro uncertainty, and considers macro uncertainty movements over the period 1991–2015. The estimated measures of macro uncertainty, base-case and its alternatives, show that the important uncertainty episodes of the Iranian economy are associated with deep recessions. Specifically, the major spikes in the baseline estimate occurred during the 1992:1–1994:1, 1994:3–1995:2, and 2011:3-2013:3 recession periods. Finally, results of impulse responses show that the macro uncertainty innovations are followed by a significant persistent decrease in both investment and production, supporting the findings of long-lived negative effects of uncertainty.

The economic status of society does affect both kinds and amounts of violent crimes. This paper is going to analyze the relationships between some economic variables in Iran, on one hand, and violent crimes on the other: Economic growth, misery index, and female employment rate are the main economic variables in this research. Proxies of violent crimes in this paper include the number of intentional murders, number of unintentional murders, number of maiming, number of beating documents, and poising documents. Some findings of this paper indicate a positive and significant relationship between economic variables and violent crimes in question in Iran in both the short run and long run. The periods of study are 1981-2016. One policy implication for this work is that increasing the cost of committing the crime, decreasing the misery index, and progress in economic growth, all can decrease violent crimes in Iran.

This paper uses a dynamic stochastic general equilibrium model to investigate the effect of fiscal and monetary policy on the stock market in Iran. Results show that a positive money shock leads to a rise in output, stock price index, and inflation. In addition, the response of the stock demand to money supply shock is negative. We found that a positive government expenditure shock led to a rise in output and inflation. The response of stock demand and stock price index to the government expenditure shocks are negative. Furthermore, results show that a stock market shock leads to a rise in output and inflation.

Access to finance through financial institutions is highly dependent on financial literacy. The basic purpose of this paper is to examine the women’s financial literacy level in Pakistan, especially, among women entrepreneurs. This study also tries to determine the effect of the financial literacy of women entrepreneurs on their access to finance and subsequent financial decision-making about their businesses. Current research conducted in this study used semi-structured questionnaires, selected interviews, and focus groups. Findings show that women entrepreneurs lack proper knowledge of financial terminologies, mechanisms of financial access, and government initiatives for women entrepreneurs. It is suggested in the light of these findings, that all the relevant stakeholders should work together to enhance financial literacy among current and prospective women entrepreneurs of Pakistan. Strengthening women's entrepreneurship may play a significant role to alleviate poverty among the female population of the country.

Policy rules as one of the most acceptable methods in monetary policies are among the significant characteristics of researches about policymaking. A policy rule states how the policy tools should react to changes in economic situations. Understanding the tools and criteria of monetary policies such as changes in target inflation, changes in relative weights of prices stability and employment, and its effect on different sections of society including households and economic firms can help economic policymakers to increase the effectiveness of monetary policies. This paper studies the time consistency and structure of optimal monetary policy from the viewpoint of public sector finance concerning the heterogeneous behavior of economic agents in form of keeping liquidity and nominal assets in Iran. The study utilizes time-series data quarterly from Q1 1989 to Q4 2017. A new Keynesian dynamic stochastic general equilibrium (DSGE) models have been developed for monetary policy analysis in open economies. Results show that the redistribution effect of monetary policy leads to breakage of the link between time consistency and high inflation; a characteristic that belongs to optimal monetary and fiscal policies.

In some production processes, unlike traditional data envelopment analysis (DEA), decision-making units (DMUs) consume widely used inputs since increasing them is more favorable for improving efficiency. Plastic wastes and rotten fruits are two instances of widely used inputs for recycling factories. In this paper, weak disposability of inputs will be presented with non-uniform profit factors for inputs, and then the model will be extended to cases that consume normal and widely used inputs, and produce desirable and undesirable outputs, simultaneously. Due to a nonlinear form of the final model, a linearization method is presented to provide a linear structure of the technology. A directional distance function approach, including weakly disposable inputs and outputs, is introduced to deal with widely used inputs and undesirable outputs. Finally, the approach will be tested by applying it to some domestic sewage treatment plants in China. Results show the proposed approach can discriminate between DMUs in a rational way and with less computational effort and also it can be used for the efficiency analysis when widely used inputs and undesirable outputs are presented.

This research attempts to measure the knowledge economy by Combining Inductive and Deductive Approaches. In this essay, a comparison between different perspectives on the knowledge economy was done, and then the knowledge economy is defined as “achieving higher productivity levels by utilizing knowledge”. After examining factors affecting productivity, these factors are classified into four categories including 1- Governance quality and business environment; 2- Quality of information and communication infrastructure; 3- Economic freedom and international relations quality; and 4- Level of knowledge and innovation. Subsequently, by calculating the productivity level for 54 countries and dividing the productivity of each country into these four factors above, the contribution of the fourth factor, and the role of knowledge and innovation in the knowledge economy were calculated and presented as the indicator of the knowledge economy. In each of these four categories, three or more indicators were placed, and fifteen indicators were used. The data of the 15 indicators were extracted in a panel containing information from 54 countries between 2000 and 2016. The weight of different productivity factors was estimated using the Bayesian Panel method. Results of the ranking of the selected countries indicate that the United States, Japan, and Germany are leading countries in a knowledge-based economy.

In the literature of economics, culture is a public good that is largely influenced by public expenditure, policies and government interventions. On the other hand, sustainable development (encompassing economic, social and environmental dimensions) has become the dominant paradigm in the discourse of governments and international institutions. Therefore, investigating causal relationships between cultural expenditure (as an indicator of the relative importance of the cultural sector in public policy-making of governments) and the various dimensions of sustainable development can help explain the importance of culture in development policies. In this regard, the present paper examines these causal relationships using the panel vector error-correction (PVEC) model for the European Union countries during the period 2000 to 2015. The results indicated that the cultural expenditure (share of total expenditure or GDP) is the Granger causality of the indicators of sustainable development. In addition, an inverse causal relationship from development to public expenditure on culture confirms some of the indicators of sustainable development such as public expenditure on education, the level of citizens’ confidence, gross domestic product, and the final consumption expenditure of households.