Economic Research and Perspectives

Economic Research and Perspectives

A System Dynamics Approach to Privatization through Stock Market and Economic Growth in Iran

Authors
Nemat Falihi 1
Shamsi Morovat 2
1 Assistant Professor, Faculty of Economics and Accounting, Azad University, Tehran Central Branch
2 Expert of Social and Economic Systems
Abstract
The relationship between privatization and economic growth is the main focus of this research. A system dynamics approach and theoretical relationships in macro economics to growth patterns is used to study the impact of privatization through stock market on economic growth in Iran. The output calculation is done by human capital indicators such as the cost of investment in research and development, life expectancy, the rate of education and standard of living which are regularly published by the United Nations Organization. For estimating the rate of privatization, private investment and demand for stock, the statistics are provided by the Central Bank of Iran, the Organization for Privatization and the Stock Market Organization. Using a system dynamics approach to macroeconomics and the above-mentioned indicators the interaction and relationships between privatization and economic growth is explored in this paper. This approach which was firstly introduced by Forrester in 1973 can potentially improve and reform the unsuitable monetary and fiscal policies. In this regard the VENSIM and econometrics software packages are applied to simulate the results till the year 2020. Moreover, the economy is divided into many sections as stock market, investment and production. The results indicate that the rate of privatization in the stock market has a positive effect on economic growth. Finally, it is believed that more attention to private investment can result into increase in economic growth.
Keywords
economic growth
Privatization
Stock Market
System Dynamics Approach
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Economic Research and Perspectives
Volume 12, Issue 3
Autumn 2012
Pages 165-190