Journal of Money & Economy
Volume:8 Issue: 3, Summer 2013

Sudden stops can be characterized by sharp reversals in capital inflows، large declines in output، and steep collapses in real asset prices (Mendoza and Smith، 2009). In almost all recent crises، capital account reversals amounting to more than 10% of an afflicted country’s GDP have occurred (Calvo and Reinhart، 1999 and Nabli، 1999). More specifically، reversals in capital flows to emerging market countries in the 1990s and early 2000s exerted a substantial influence on the relevant economies affected even leading to financial crises، while، on the whole، international capital reversal has been absent in the case of advanced countries. Another characteristic of recent crises is the swiftness and the magnitude of the crises itself and its impact on asset prices and the exchange rate. The objective of this paper is to examine the role of sudden stops in causing a currency crisis in Asia. Moreover، the herding behaviors on capital flows will be analyzed in Asian emerging countries. So the probability of the occurring a currency crisis after sudden stop in capital inflows caused by herding behaviors will be estimated by a Logit regression for Asian countries during 1970-2011. In general، the econometric results have indicated that fluctuations in international capital flow، leading to sudden stops، have been significant determinants of currency risk during the recent currency crises.

Oil price shocks are the main source of macroeconomic fluctuations in oil exporting countries. It is believed that appropriate monetary policy can help to stabilize these unwanted variations toward optimal allocations. A stochastic dynamic general equilibrium model featuring the properties of both cost push and wealth effect transmission channels is developed for the Iranian economy. In this context، it is possible to evaluate the role of monetary policy measures to accommodate supply side cost push effects and demand side wealth effect of oil price shock. This paper is intended to investigate the optimal monetary policy strategy for the economy of Iran and calibrated for its structural characteristics and patterns of external shocks. The comparative analysis of alternative monetary policies in terms of Ramsey، and optimal simple rules is performed based on key nominal and real variables variance reductions and the linear quadratic loss (LQ) function. Our findings show that domestic inflation targeting rule is the optimal monetary policy both in terms of stabilization performance and welfare costs. It must be mentioned that the addition of exchange rate to domestic inflation targeting rule has failed to improve the welfare measure and stabilization in comparison to domestic inflation targeting rule

The presence of moral hazard in the banking sector can have worrying results. This paper examines the role of government guarantees to banks in generating moral hazard in Iran. We test for moral hazard among bank creditors by determining whether protected banks received more funds from creditors than non-protected banks. Empirically، to determine the existence of moral hazard among bank managers، we examine whether managers of protected banks had more risk than their counterparts at non-protected banks. Using panel data، we find stronger evidence of moral hazard among bank managers than bank creditors. We test for moral hazard among bank managers by using the capital ratio as bank risk variable. The coefficient of the lag of capital ratio is significant. This is strong evidence for the existence of moral hazard among bank managers. The coefficient of loan asset ratio is negative and significant. Banks managers decrease bank lending in risky conditions. The coefficient of the Debt to Central Bank variable is significantly negative، suggesting that the Government protected banks face lower risks. This is strong evidence for the existence of moral hazard among bank managers. As a robustness check، we used the Z-score instead of capital ratio for survey of the effect of moral hazard on bank risks. We used the Z-score as an alternative to capital ratio. This results show that there is strong evidence for the existence of moral hazard among bank managers.

Using a State-space model، this paper investigates the contribution of both observed and unobserved fundamentals to nominal exchange rate movement in Iran for the period 1991:2-2011:4. To this end، we follow Engel and West (2005) and Balke et al. (2013) and use an asset-pricing approach to develop a rational expectations present value exchange rate model. In order to examine the role of fundamental factors in exchange rate determination، we estimate the variance contribution of each factor to variance decomposition of the deviation of exchange rate from its long run equilibrium. The random walk Metropolis-Hastings algorithm، Kalman filter and Carter and Kohn algorithm are used to decompose the variance contributions. The results show that the observable fundamentals and the unobserved monetary demand shocks explain about 58. 9 and 38. 7 percentages of exchange rate fluctuation، respectively. Hence، contrary to previous studies in Iran، which have focused mainly on observable fundamental factors، we find that the unobservable fundamentals also play key role in determining the exchange rate movement in this country. Moreover، we find that the nominal exchange rate does not follow a near random walk behavior. It implies that the foreign exchange rate market in Iran is not efficient. Our findings might have important policy implications for monetary authorities.

A large economic literature discusses the implications of export sanctions for a variety of states around the world. This paper investigates the macro-level consequences of imposing oil export barriers on an oil exporting country. We employ a large real financial computable general equilibrium for Iran. The model is calibrated based on 1999 Social Accounting Matrix for the economy of Iran including 112 commodities and 47 activities. We find that the impact of a 50% negative shock in oil export would amount to a 4. 6% reduction in GDP، a 6. 8% fall in private consumption، a 20. 2% cut in government spending، a 20. 4% decrease in import، a 9. 9% contraction in capital formation، and a +29. 2% increase in non-oil export. We also find that there is a conflict between government benefits and national benefit. Our sensitivity analysis proves the robustness of the results.

A large body of literatures links financial development to economic growth، yet the channels through which inflation and economic development affect this relationship have been less thoroughly explored. This research takes econometric and trilateral graphic approaches to examine these channels using 99 developing and developed countries during the years 1960-2009. Findings prove that respectively there is a positive، negative and neutral relationship between financial development and economic growth in low، high and very high level of inflation. The effect of countries development situation on finance-growth nexus shows that among the financial development indexes only the effect of M3 is different through developed and developing countries.