International Economics Studies
Volume:37 Issue: 2, Summer and Autumn 2011

Governments attempt to achieve the goals of low inflation rate and sustainable economic growth rate. The objective of this study is to analyze the roles of determinants such as the liquidity of money، weighted average of interest (profit) rate on banking deposits، exchange rate and the public debt on inflation and economic growth in Iran، using the quarterly data during the period of 1989-2008. This study is based on the theoretical works of the Sargent and Wallace (1981) by focusing on the ‘Fiscal Theory of Price Level (FTPL) ’ approach. In this study، through relying on the structural relationship between variables and economic shocks، while applying the required constraints، the constructed models are estimated by VECM and SVEM methods. Findings of the study are consistent with both the quantity theory of money as it was interpreted with Sargent and Wallace (1981) and the FTPL. More specifically، the inflation rate is largely affected by monetary–exchange rate policies as well as by fiscal policy. Although، the weighted average of interest sate does not play a significant role in the long–run relationship، a rise in public debt through increasing the liquidity of money plays a significant role in rising price level. But، a significant long sun relationship between the changes in the liquidity of money، interest rate، the public debt and the change in output level does not exist. The economic growth does respond mainly to the technological shocks and factors productivity improvements. In general، we conclude that the inappropriate monetary and exchange rate policies and the rise in public debt through fiscal policy are the main determinants of the inflation rate in the Iranian economy.

This paper proposes a new forecasting model for investigating relationship between the price of crude oil، as an important energy source and GDP of the US، as the largest oil consumer، and the UK، as the oil producer. GMDH neural network and MLFF neural network approaches، which are both non-linear models، are employed to forecast GDP responses to the oil price changes. The results are compared with the results obtained by the ARIMA linear model. Using the annual data of these countries from 1952 to 2010، the empirical results indicate that the GMDH neural network using lagged GDP and oil prices yields the least error in forecasting for the US and the UK.

The recent literature on taxation and growth has stressed the optimality of a zero long-run taxation on all accumulative factors of production. For a given path of government spending، the optimal tax plan requires the government to build up a positive stock of public wealth in the short run; in the long-run، government spending can be financed with the income accruing from the management of the portfolio of public assets، rather than resorting to distortion taxation. In this study، following Barro (1990) and based on Corsetti and Roubini (1996) work that is explained and extended، we study the size of government productive in endogenous growth models. By describing competitive equilibrium and characteristics of equilibrium market in balanced- growth path، we determine the optimal government spending and optimal tax rates on physical capital and human capital. After determining balanced-growth path that along which human and physical capital growth at the same rate، we have determined optimal government spending and optimal tax rates by consider the effect of government spending، that specified in system and have a role of explanatory on productivity of human capital and physical capital in Iran.

This paper evaluates the impact of the positive terms of trade (TOT) Shock on macroeconomic variables، using panel data for the six OPEC major oil exporting countries during 1989-2005. The findings indicate that the positive TOT shocks have the small and negative impact on savings and on the trade balance. Nevertheless، it has a positive impact on investment (specifically private investment) and on consumption (specifically government consumption). Furthermore، since these countries are the prime importer of capital goods، the Dutch Disease effects in response to real exchange rate appreciations are weakening.

This paper evaluates the interacted effects of the fiscal and monetary policies on the nominal and real macro-variables of the Iranian economy. Our analysis is thus based on the optimal control theory by which the optimal path of the control variables including monetary and fiscal tools are determined over the period 1963-2006. We also use a macro-econometric model in form of a simultaneous equation system to investigate interaction between both real and money (nominal) sectors. Due to the importance of the foreign sector in the country economic development، several scenarios have been conducted particularly on imports. The empirical results indicate that a focus simultaneously on both monetary and fiscal policies should cause an optimal control of the objective variables to reach approximately their appropriate values. This would be happened as a result of a productive relationship between the government and the central bank.

Trade liberalization is often the core attention of foreign economic strategies in developing countries. Findings in the literature confirm a significant effect of free trade on developing economies through which the economic sectors benefit from technology transfer and spillovers and increasing production capacities and input productivity leading to international competitiveness. On the other hand، making a policy or a strategy، without being concerned with its indirect and interacted effects on an economy، is controversial and even misleading. However، it is possible to apply for a CGE model in order to control for these effects through predicting changes in economic indicators. This paper specifies a CGE model to examine the effect of trade liberalization on the Iranian economy. Particularly، the main objective is to focus on the scenarios of tariff reduction/elimination in the economic sectors، to seek for their effects on the country’s international competitiveness. The Iran''s 1996 social accounting matrix is the main data resource for the CGE model estimation that has been done by the GAMS. Overall، the results obtained revealed the fact that trade liberalization was not able to affect significantly international competitiveness of the Iranian sectors at least in the short-run. It implies a continuous support of the trade liberalization strategy in the country should be in effective as a long-run process.

This paper has investigated a possible relationship between credit market structure and bank development in Iran and selected developing countries، using a panel regression analysis. Accordingly، the bank development index is proxied by the allocated credits to private sector، while a dummy variable has been defined as a proxy for credit market. To estimate the regressions، we have used data of 44 developing countries over the period 2000-2008. The results confirm that، depending on the regulation system، the coefficient value of the credit market has been different in the countries under consideration. The results show that the effect of credit market on bank development has been more pronounced in China، Ecuador، Iceland، Iran and Malaysia than that of other countries، which implies the more efficient regulation system in developing countries the more development in their banking system. Thus، the bigger effect of the credit markets on bank development can be obtained by the further reforms in these markets.