Iranian Economic Review
Volume:25 Issue: 65, Autumn 2021

We study the impact of internal governance mechanisms on the operational risk management provided with deposit banks of Turkey as a Basel compliant representative banking system. Drawing from internal audit, internal control and risk management literature, we consider the impact of characteristics of these mechanisms on the degree of operational loss at the subcommittee level. Two factors stand out as improving the internal governance of banks. Internal governance quality improves resulting in less material operational loss with adequate staffing. Organization of the internal governance mechanisms, carefully structured control points, and sufficient reporting to senior-level management in banks ensure that banks’ shareholders experience fewer surprises. Excess funding has limited or no effect on mitigating operational loss. Characteristics are more significant for internal audit and internal control subcommittees than they are for risk management subcommittees. Results are robust when tests are repeated with aggregated data to capture potential cooperation between and contribution of the individual units.

Systemic risk is the collapse and crisis in the financial system that is caused by default or crisis in one or more firms. In this paper, the conditional value-at-risk (𝐶o𝑉𝑎𝑅) method is used as a measure for this kind of risk. This measure is going to be calculated for the five largest banks of the country including Mellat, Tejarat, Saderat, Parsian, and EN from June 17, 2009, to May 7, 2019, and the share of each bank in overall systemic risk is going to be identified. This paper is to investigate the effectiveness and participation of each of these banks in systemic risk. The results show that Parsian, Mellat, EN, Tejarat, and Saderat banks are the most involved in the systemic risk of the whole system, respectively. In addition, we try to calculate the effect of systemic risk of the entire banking system on each of these banks and the impact of each of these banks on the crisis in another bank. The results of this section indicate that in a crisis in the whole system, Mellat bank is the most stable bank, and accepts less impact of the crisis than other banks. By contrast, Parsian and Tejarat banks are the most affected by the crisis in the banking network.

Reclassification risk is a downside for the insurance applicants in the face of a sharp increase in premiums due to the deterioration of individual health conditions. Guaranteed renewable (GR) health insurance directly protects the applicants against the mentioned risk. The reason for this support is the existence of a prepayment in the first insurance premium. Instead, the premiums in the next years are independent of the applicant’s future health. The current study aimed at evaluating the effect of providing this new insurance policy in the health insurance market of Iran on economic welfare of health insurance applicants. This evaluation was conducted in the form of two hypotheses, including "provision of GR insurance along with other insurance" and “the replacement of all insurance with GR insurance”. The economic welfare at micro-level is measured by changes in household consumption. In an econometric model, the policy effect was evaluated through propensity score matching. In general, the provision of GR insurance in the health insurance market of Iran increased the welfare of insurance applicants. However, the welfare benefits are greater in the second hypothesis. If the integration plan for insurance funds be implemented, GR insurance can be a good alternative to all insurance funds due to the elimination of reclassification risk and the increase of the welfare of health insurance applicants.

Resource-rich developing countries are forced by economic fluctuations due to international commodity price movement. One way to reduce the volatility adverse effects is to establish institutions such as Sovereign Wealth Fund. However, the way this fund is managed is important. Iran, as a resource-rich developing country, suffers from economic fluctuations. To manage resource revenues, National Development Fund (NDF) has been established. In this paper, using DSGE model, we examined different scenarios for managing fund resources. A scenario, without any stabilizer Fund and two different scenarios for National Development Fund. In the second scenario, NDF has a role like the one in Sixth Development Plan. In the third scenario, all oil revenues are deposited to NDF and a part of the fund as much as interest rate in the OECD countries plus 70% of long-run oil revenues invested in the economy. The Results indicated that the management of oil revenues by the Fund, in which the inflow of oil revenues into the economy follows the commitment, is an appropriate policy to reduce the economic fluctuations in Iran.

and economic fields. Therefore, in general, most of the countries regulate TV business well to produce an optimal impact on the nation. In Indonesia, the TV broadcasting business is growing very significantly. After implementing Broadcasting Act number 32 of 2002, the number of TV broadcasting companies increased to 1,251 compared to before 2002, which only had 11 channels, and were dominated by the private TV stations. However, the economic contribution of the TV broadcasting business in Indonesia is still small. Even in 2017, the number of TV companies decreased by 14.23% to 1,073. This situation raises a serious question: how exactly does Indonesian government policy regulate the TV industry? This article is the result of qualitative research that uses interviews and document analysis as a method of collecting data. The results showed that the TV broadcasting industry in Indonesia cannot develop properly because the government does not apply fair rules to the private TV industry. Political interests still color the formulation of rules in which the government and big TV broadcasting companies apply the symbiotic mutualism policy to protect each other's interests.

The orangutan is a famous and unique species of big ape living in arboreal forests and can only be found in Borneo and Sumatra Island. The orangutans are divided into two subspecies; Borneo orangutan and Sumatra orangutan. They are critically endangered species due to uncontrolled, rapid development activities. In Malaysia, there is an estimation of 12,300 Borneo orangutans undergoing rehabilitation in Ulu Segama Forest Reserve, Sabah, and Lanjak-Entimau Wildlife Sanctuary, Sarawak. These parks are open to the public and have attractions like exotic plants and wildlife, and interesting activities like elephant riding. The introduction of entrance fees to these places may overcome the inadequacy of public funds for conservation and preservation efforts. This study determines the economic value of Borneo orangutans by obtaining an estimated value of willingness to pay (WTP) from visitors and identifies the factors affecting the ability to pay for the conservation of Borneo orangutans in Kemaman Mini Zoo at Terengganu. The method used is the Contingent Valuation Method (CVM) by asking visitors’ WTP using a questionnaire. Results show that visitors’ WTP is heavily influenced by the bid price, income, and age. Visitors put a higher value on the orangutan and the mini zoo compared to the current entrance fee. This value can be used by zoo operators to make decisions related to the threats of the extinction of endangered species.

Sub-Saharan Africa (SSA) is one of the regions of the world that exhibits high disparities in income distribution. Income inequality has remained ubiquitous and pronounced across countries in the region, with Sub-Saharan Africa ranking closely behind Latin America as the second most unequal region globally. This paper specifically investigates the effect of disparities in income dispersion on economic growth in SSA countries from 1995-2015 using the Blundell-Bond panel estimation procedure. Results from our analysis generally indicate that income inequality has a consistent, direct, and significant noxious effect on growth, implying that income inequality stifles growth in the region.

This study re-examines Squalli-Wilson's measure of trade openness from the perspective of services. An attempt was made to compose all modes of services supply to form a composite measure of service openness that has rarely been used in trade literature. A global sample comprising different regions based on cross-country data was applied to test the reliability of this measure using correlation coefficients, income, and environmental quality models. Ordinary Least Square (OLS) and Two-Stage Least Square (2-SLS) Instrumental Variables approach were applied. Findings from the growth impact of trade are robust and consistent with prevailing literature supporting the positive impact of service trade on economic growth. However, our empirical estimate based on the two measures of environmental pollutants, shows that services openness reduces SO2 and increases CO2 emissions. These findings are consistent with most of the existing literature supporting the "gains from trade" hypothesis in the case of SO2 and the "pollution havens” hypothesis in the case of CO2 emissions. Nonetheless, the results provide further support in the context of services for the use of composite trade intensity proposed by Squalli-Wilson that not only considered trade/GDP ratio but also the relative importance of the country to the world trade. The inverted U-shaped EKC was also verified in both two measures of environmental pollutions. The policy implications of these findings are that care must be taken while increasing openness in areas of services to increase economic growth and to reduce the phenomenon of pollution haven in the case of CO2 emissions.

The recent events on the global scene have pointed once again to the importance of the increasing level of interdependence among markets. Economic volatility in one or several countries is easily transmitted to neighbors and even beyond. Consequently, national economic issues need to be considered from a regional/global perspective. Therefore, this paper seeks to investigate the extent of macroeconomic shocks transmission among eight leading African countries selected based on the size of the economy and regional distribution. This is critical to give a further assessment of economic integration efforts in the continent and also reveal the pattern of macroeconomic reactions to continental shocks among African countries especially in the aftermath of commodities and crude oil prices shocks and other unobserved factors including diffusion of technological progress. To achieve this objective, we employed Global Vector Autoregression (GVAR) using data from 1990 to 2016 to examine the extent of shocks transmission of Real GDP among these countries. Also, we introduced data from important trading partners from developed and developing countries as expected in a standard GVAR model. The GVAR method is very appropriate in this context as it combines individual country-specific models in which variables are related to country-specific foreign variables in a consistent manner. This method is preferred to others in the literature as it allows us to address the curse of dimensionality problem. The results show evidence of macroeconomic shocks transmission among African countries including the North African countries and Sub-African countries. However, the results further indicate that African countries are largely influenced by external shocks rather than shocks from the African region.

From the constitutional revolution (1907) to the Islamic revolution (1979), Iranian governments had been fluctuated sharply (longevity of government from 3 days to more than 12 years). This situation was the result of permanent competition between the king, parliament, government, interest groups, and also international political conditions. In this paper, we study the effect of mentioned conditions on economic growth. For this purpose, we define 7 political instability indices and examine the best definition for political instability that was suitable for the Iranian condition in mentioned duration. Using the Solow growth model and OLS approach, we find that when the longevity of government was smaller than four years, or the longevity of two of three sequential governments were smaller than one year, then Iran experienced political instability and it shrinks the economic growth. Finally, we find that when the government was politically stable, and institutional constraints on government by other branches were strong, the Iranian economy experienced positive and reliable economic growth. These conditions had been experienced in three periods of time: 1927-1939, 1955-1960, and 1964-1977. It means that the duration of 1907-1979 can be divided into two major parts: duration of political stability with remarkable economic growth (for three mentioned periods), and duration of political instability with high economic fluctuations or recession.

The liquidity crisis is the major driver of banks' failure in Nigeria as a failure of some banks in the past was brought in connection with a liquidity problem. We examined the CG and LM of Nigerian banks by obtaining data from annual accounts and reports of the 10 DMBs from 2012 to 2018.  Data were analyzed using the Generalized Method of Moment (GMM). Findings showed that the previous year's liquidity significantly and positively influence the current year's liquidity ratio. Board size exerts a negative insignificant influence on liquidity management; meetings have a direct but insignificant influence on liquidity management. Board independence shows a significant but negative effect on liquidity management. Gender diversity and bank size were found to exhibit indirect and insignificant influence. The study concludes that corporate governance exhibits a joint significant effect on liquidity management of Nigerian DMBs. The main recommendation arising from the finding is that the inclusion of directors on the board should be based on their skills and ability to understand and drive banks' operations.

This paper estimates the price and income elasticities of domestic petroleum consumption in Nigeria using the Johansen cointegration and vector error correction model approaches.  The paper used annual time series data for domestic petroleum consumption, petroleum price, and real income over the period 1985 to 2018. The result indicates the existence of a long-run cointegration relationship between domestic petroleum consumption and the independent variables. The estimates of the long-run price and income elasticities are -0.212 and 0.293 which suggest that petroleum consumption is both price and income inelastic in Nigeria. The short-run analysis indicates that the elasticity coefficient of price is insignificant while income is negative -0.628 but significant. The result of the Granger causality test shows evidence of short-run and long-run unidirectional causality running from income to domestic petroleum consumption. The results imply that there is a need for a strong policy that will improve the efficiency of the electricity sector and promote the use of power-saving machines and technology to reduce domestic petroleum consumption that may result from an increase in per capita income in Nigeria.

Stock market behavior is a contentious matter among researchers in the field of finance. In literature, various conventional and behavioral explanations exist to the real-life stock market behavior. This study considered and incorporated all three schools of thought on the matter and applied a nonlinear model namely a threshold quantile autoregressive model as a contribution to exploring the behavior of the Pakistan stock market from 2000 to 2018. The findings of the study indicate that autocorrelation exists in the KSE 100 index and has a significant impact on both higher and lower regimes. The results also point out that the investors overreact and underreact in different states of the stock market. During the examination of the impact of stock characteristics and behavioral factors on the existence of stock market autocorrelation. It is concluded based on empirical evidence that these factors cause a significant impact on autocorrelation in the index. The study is of the view that behavioral biases are among the prime reasons for violation of efficient market behavior and need further exploration.

This article examines whether there is a wage gap premium in the formal sector versus the informal sector of the Iranian labor market. We used household survey data conducted by the Statistical Centre of Iran for 2001, 2006, 2011, and 2016 to investigate the characteristics of the informal sector as well as differentials in wage structures between sectors. The findings indicate that a significant part of the Iranian labor force is employed in the informal sector, and this sector shows different behavior from the formal sector in determining wages. It has also been concluded that there is a wage gap between the formal and informal sectors, and this gap after a minimal increase in 2006, narrowed over time.