Economic Research and Perspectives

Economic Research and Perspectives

Inflation Rate and the Performance of Financial Markets in Iran

Authors
Ali Falahati 1
Kiomars Sohaili 2
Farzad Noori 3
1 Associate Professor of Economics, Razi University, (Responsible Author)
2 Associate Professor of Economics, Razi University
3 M.A. in Economic, Razi University
Abstract
Achieving a high and sustainable economic growth has always been the main target of economic plans in different countries. Proving a positive relationship between financial development and economic growth by many studies has convinced the researchers to study the effective factors on the growth and development of financial markets. Inflation is one of the main factors that have a great impact on the countries’ financial development. So, the focus in the studies has mainly been on explaining the form of relationship between inflation and financial development. In this paper, the relationship between inflation and financial market development in Iran during 1978 to 2007 for the money market and during the summer of 1999 to spring of 2008 for the capital market has been reviewed. Econometric model of this research has been specified according to Boyd, Levine and Smith model (2001). Firstly, a simple linear model is used for controlling other economic factors that may be correlated with financial market performance. Then, a threshold regression is handled for explaining the nonlinear relationship between inflation and financial market development. In this model, different thresholds that limit inflation are considered. Conditional least squares method (CLS), is applied for estimating the model. The threshold limit for inflation has been determined based on the minimum error sum of squared criterion. The results of the estimated model indicate that a negative relationship between inflation and financial development indexes of money market. This positive relationship also exists between inflation and stock market development indexes. In the same way, the output of the estimated models has shown that in the some domain of inflation, the negative relationship between inflation and financial development indexes of money market is not significant. In addition, the results of the estimated models revealed that there is no a threshold limit for the impact of inflation on the stock market.
Keywords
Inflation
Financial Development
Financial markets
Money markets
Capital markets
Threshold
بانک مرکزی جمهوری اسلامی ایران،"گزارش اقتصادی و ترازنامه­های سال­های مختلف"؛ اداره حساب­های اقتصادی.##
تقوی، مهدی (1382) "نهادهای پولی و مالی بین المللی تهران"؛ پژوهشکده امور اقتصادی. ##
حشمتی مولایی، حسین (1383) "عوامل مؤثر بر توسعه مالی در نظام بانکداری ایران"؛ پژوهشنامه اقتصادی، پژوهشکده امور اقتصادی، سال چهارم، شماره 2. ##
ختایی، محمود و سیفی پور، رؤیا (1379) "نقش منابع مالی درازمدت در رشد اقتصادی ایران"؛ فصلنامه پژوهش­های اقتصادی ایران، شماره 4 و 5. ##
شبانی، محمد (1386) "بازارهای پولی و مالی بین­الملل" سازمان مطالعه و تدوین کتب علوم انسانی دانشگاه­ها (سمت). ##
شیوا، رضا (1380) "اثر تأمین مالی در درازمدت بر رشد اقتصادی در ایران"؛ اقتصاد کشاورزی و توسعه، شماره 34. ##
صمدی، علی­حسین (1378) "سرکوب مالی و رشد اقتصادی در ایران ارزیابی الگوی مک­کینون-شاو"؛ مجله برنامه و بودجه، شماره 43 و 44. ##
فبوزی، فرانک؛ مودیلیانی، فرانکو و فری، مایکل (1376)"مبانی بازارها و نهادهای مالی"؛ ترجمه حسین عبده تبریزی؛ تهران: انتشارات آگاه. ##
کرمی قهی، ولی ا... (1375) "جایگاه و نقش بخش مالی در اقتصاد و اقتصاد ایران"؛ تازه­های اقتصاد، شماره­های 57 تا 60. ##
کمیجانی، اکبر و نادعلی، محمد (1386) "بررسی رابطه علی تعمیق مالی و رشد اقتصادی در ایران"؛ پژوهشنامه بازرگانی، شماره44: 47-23. ##
گتاک، سابراتا (1377) "اقتصاد پول در کشورهای در حال توسعه"؛ ترجمه علی حسین صمدی؛ تهران: مؤسسه تحقیقات پولی و بانکی. ##
نظیفی، فاطمه (1383) "توسعه مالی و رشد اقتصادی در ایران"؛ پژوهشنامه اقتصادی، پژوهشکده امور اقتصادی، سال چهارم، شماره 3. ##
نیلی، مسعود و راستا، هدی (1382) "توسعه مالی و رشد اقتصادی"؛ مجموعه مقالات سیزدهمین کنفرانس سیاست­های پولی و ارزی، پژوهشکده پولی و بانکی، بانک مرکزی. ##
نیلی، مسعود و نفیسی، شهاب (1384)"تخمین سرمایه انسانی بر مبنای متوسط سال­های تحصیل نیروی کار برای ایران 1379-1345 " فصلنامه پژوهش­های؛ اقتصادی ایران، سال هفتم، شماره 25. ##
هیبتی، فرشاد و نازی محمدزاده اصل (1383) "ارزیابی آثار توسعه نظام مالی بر تشکیل سرمایه و رشد اقتصادی"؛ پژوهشکده امور اقتصادی، سال چهارم، شماره 4. ##
Agrawal, P. (2004) Interest Rates and Interest in East Asia: An Empirical Evaluation of various financial Liberalisation Hypotheses; Journal of Development Studies, Vol. 40, No. 3, Feb: 142-173. ##
Asli, Demirguc-kunt and Ross Levin (1996) Stock Market Development and Financial Intermediaries Stylized Facts; The World Bank Economic Review, Vol.10, No. 2: 291-321. ##
Azariadis , Costas and Smith, Bruce D. (1996) Private information mony, and growth: indeterminacy, fluctuations, and the Mundell- tobin effect; Journal of  Economic Growth, 1: 309-332. ##
Azariadis, Costas and Smith, Bruce D. (1998) financial intermediation and regime switching in business cycles; American Economic Review, 88: 516-536. ##
Barnes, Michelle; boyd, John H., and Smith, Bruce D. (1999). “Inflation and asset returns; European Economic Review, 43: 737-754. ##
Bencivenga, Valerie R., and Smith, Bruce D. (1991) Financial intermediation and econoomic growth; Review of Economic Studies, 58: 195-209. ##
Bittencourt, M. (2006) Financial Development and Inequality: Brazil 1985-99; Bristol Economics Discussion papers 582-600. ##
Bittencourt, M. (2007) Inflation and Finance: Evidence from Brazil; Working Paper No.57:163. ##
Boyd John H. and Smith, Bruce D. (1997) Capital Market imperfections in a  Monetary Growth Model; Economic Theory, 11: 241-273. ##
Boyd John H. and Smith, Bruce D. (1998) Capital Market imperfections, International Credit Markets, nonconvergence; Journal of Economic Theory, 23: 335-364. ##
Boyd, John H. Levine, Ross, and Smith, Bruce D. (1996) Inflation and Financial Market performance; Federal Reserve Bank of Minneapolis Research Department, Working Paper 573D.  ##
Boyd, John H.; Levine, Ross, and Smith, Bruce D. (2001) The impact of inflation on financial market performance; Journal of Monetary Economics, 47: 221-248. ##
Chari, V.; Jones, L.E. and Manuelli, R.E. (1996) Inflation, Growth, and Financial Intermediation; Federal Reserve Bank of St. Louis Review 78: 11-58. ##
Choi, S., B.D Smith, et al. (1996) Inflation, Financial Markets, and Capital Formation; Federal Reserve Bank of St. Louis Review. ##
Diamond.W.(1984)  Financial intermediation and delegated monitoring; Rewiew of Economic Studies, 51: 393-414. ##
Dong-Hyeon, Kim(2000) “Dynamic Relationship between Inflation and Financial  Development. ##
English, W.B. (1999) Inflation and Financial sector Size; Journal of Monetary  Economics 44: 379-400. ##
Gillman, M., and M. Harris (2004) Inflation, Financial Development and Endogenous Growth; Working Paper wp 24-04, Monash University. ##
Gillman, M., M. Harris and Michal Kejak (2006) The Interaction of Inflation and Financial Development With Endogenous Growth##
Haslag, J. and Koo, J. (1999) Financial Repression, Financial Development and Economic Growth; Federal Reserve Bank of Dallas Working Paper: 99-102. ##
Hybens, E. & smith, B., (1999) Inflation, Financial markets, and Long-run Real Activity; Journal of monetary Economics 43: 283-315. ##
Khan, M. S.; A. S. Senhadji, and B. D. Smith (2006) Inflation and financial depth; Macroeconomic Dynamics, Vol. 10: 165-182. ##
Khan, M. Senhadji, A.s., Smith, B.D., (2001) Inflation and Financial Depth; IMF Working Paper. ##
King, Robert G. and Levine, Ross. (1993a) Finance and Growth: Schumpeter  might be right; Quarterly journal of Economics, 108: 717-737. ##
Mohamad Omran & John Pointon (2001) Does the Inflation rate affect the performance of the Stock Market? The case of Egypt; Emerging Markets Review2: 263-279. ##
Rajan and Zingales (1998) financial Dependence and Growth; American Economic Review, Vol. 88: 559-586 ##
Roubini, Nouriel and sala-i-Martin, Xavier (1992) Financial Dependence and Growth; Journal of Development Economics 34. ##
Rousseau, P. L. & Hakan Yilmazkuday (2009) Inflation, Financial Development, and Growth: A trilateral analysis; Economic systems 33: 310-324. ##
Rousseau, P. L. & Wachtel, P. (2002) Inflation Thresholds and the Finance-Growth nexus; Journal of International Money and Finance21: 777-793. ##
Yaya Keho (2009) Inflation and Financial Development: Cointegration and Causality Ananlysis for the UEMOA Countries; International Research Journal of  Finance an Economics. ##
Economic Research and Perspectives
Volume 12, Issue 3
Autumn 2012
Pages 133-163