Iranian Economic Review
Volume:13 Issue: 20, Autumn 2007

This paper analyzes the optimality of macroeconomic policies in Iran during the third five year development plan (2000-2004). For this purpose, we develop and use a macro econometric model for Iran. We determine optimal monetary and fiscal policies as solutions of optimum control problems with a quadratic objective function and a macro econometric model as a constraint. The results show that, the optimal values of macroeconomic policies have deviation from those proposed in third development plan. So that, deviations in the variables of government current expenditures, government tax revenues and government oil revenues are low and in variables of government capital expenditures and money stock as monetary policy are high.

Recent development in the globalization process and interdependence of national economic follow the importance of financial market, economic liberalization policies, technology capital and laber mobility, expansion of consumption market. In this instance, economic integration, expanding trade flows, reduction of barriers and trade constraints are the main activities of national economies. Looking towards to regional union, trade flows, integration could facilitate the process of trade liberalization to help the more cooperation between partners to inter national economics.The propose of this paper is two fold. First examine the succees and failure of the existing preferential trade agreements and regional economic groupings among the IOR-ARC countries. Secondly using the generalized gravity model and panel data during 1999-2004, explains the estimation results.The results show that IOR-ARC potential trade including Iran, while export to others excluding Iran would increase lay 35 percent, would increase 20 percent. Imports from nonmember could be 15 percent higher as the gravity model predicts.

This paper examines the relationship between income smoothing practices and firms value in Iran. This research also studies the effect of the firms’ size on the tendency to smooth income. The sample comprises 200 companies listed in the Tehran Stock Exchange within the period of 1999-2005. The "coefficient of variation method" introduced by Eckel (1981) has been modified to determine income smoothing practices. The result indicates that income smoothing practices is was present although its percentage is low. The univariate test has found that smaller firms have greater tendency to smooth income rather than larger firms. Then, an Ordinary Least Square (OLS) regression was conducted on a modified income statement model. The heteroscedasticity problem detected by a diagnostic test was encountered by (1) deflating the variable by total sales and (2) using White's heteroscedasticity-adjusted standard errors. The consistent results obtained signify that the valuation of firms concerns more on the magnitude of earnings rather than earnings stream.

This paper explores the relation between inflation and economic growth in Iran using annual data for the period 1959-2004 to check whether this relation has a structural breakpoint effect. The results indicate the threshold level of inflation above which inflation significantly slows growth is around 9-12 percent for Iran economy. This range is not surprising, given that it is not possible for the monetary authority to increase or adjust the nominal interest rate above the inflation rate.

In 2005 Afghanistan has been the origin country of the largest refugees, by about a quarter of the global refugee population, who were mainly living in Pakistan and Iran. Almost all Afghan labourers are working illegally in Iran and have not work permission. They are unskilled and cheap workers, accepting any low payed job they are offered. Afghan refugees increased the supply of labour force in Iran for more than 2 decades. So wage increase for low skill workers has been very slow, specially in construction work, where Afghan workers have a large share. The results of our research show that Afghan workers have been attracted to the prosperous provinces where the unskilled workers where most wanted. As the workers can move easily in the country, the presence of Afghan workers in Tehran, Isfahan and Khorasan, has not caused higher unemployment rate neither in cities nor in villages of these provinces, however unemployment rate in the country has been raised. If Afghan immigrants leave Iran, unemployment rate will be lower and the wage rate for unskilled workers will rise considerably.

This article investigates the pass-through of exchange rate shocks into import, wholesale and consumer price indexes in Iran by using a monthly data set for the period 1990-2006. The baseline analysis is carried out with identified an unrestricted vector autoregressive model. Impulse response functions show that pass-through is incomplete. Moreover, the price effect of an exchange rate shock is more pronounced in the case of import price relative to wholesale and consumer prices. Variance decomposition method indicates exchange rate shocks are important in explaining the variance of the prices. Also the variance of exchange rate has the biggest share in explaining the CPI inflation. These results are remarkably robust to a number of alternative specifications of the model.

As economies progressively integrate globally, the financial structures of markets and the world of finance changes. One of the definitions of financial globalization is integration of domestic financial system of a country with the global financial markets and institutions. It is now accepted that international financial integration allows the optimizing of inter-temporal consumption path and managing of financial risks by increasing the availability of assets in the local markets. It also has the spillover effect of increasing competition and efficiency throughout the international trade. There are different arguments on the impact of financial globalization on the world trade relations, however the empirical evidence is still scarce. This paper tries to fill this gap partially by studying the effects of financial integration on the trade structure operating in the country members of ASEAN+5. The focus on mutual trade relations of the block is of interest, because some arguments suggest that the trade flows extend with globalization, while others predict limitations in financial integration make trade costly at least in the short-term. It is evident that cross-country financial flows to the emerging market economies were low, at during the mid-1970s. They increased at a healthy clip during the decades of 1980s and 1990s, peaking in 1997. They suffered a sharp decline after that because of the “Asian financial and economic crises”. Therefore, the actual impact of financial integration on trade patterns remains an empirical question, which is the main subject of this paper.

This paper suggests that even if it is costless to inform all team members about the quality of a project, there are reasons to concentrate information in the hands of one person (a leader) and prevent full revelation to the rest. This deprives others of the information necessary for profitable defections; they (the followers) therefore will have no reasonable strategy other than following the informed leader because he has more information than they themselves have. Such leaders then can lead the ignorant group into cooperation in cases where information gives them an incentive not to do so. Unlike the common belief, this paper shows that lack of information transparency in a group or an organization may increase cooperation and thus efficiency compare to a regime of information dispersal.