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Mr Hossein Aghilifar, Dr Khosrow Piraei, Dr Hashem Zare, Dr Mehrzad Ebrahimi,
Volume 0, Issue 0 (12-2024)
Volume 0, Issue 0 (12-2024)
Abstract
Aim and Introduction
After the global economic recession in 2008-2009, the discussion about countercyclical and procyclical fiscal policies and their effects on the economy began. Countercyclical fiscal policy is applied to reduce economic fluctuations by adjusting government spending and taxes against the business cycle. The aim of this policy is to stabilize the economy and flatten its fluctuations. On the contrary, procyclical fiscal policy strengthens economic fluctuations in the direction of business cycles. On the other hand, fiscal sustainability refers to the government's ability to maintain expenditures, income and public debt at a certain level in the long term without jeopardizing economic stability or facing a fiscal crisis. A sustainable fiscal policy ensures that the government's debt in the long run is at a level proportional to the size of the economy. The main questions of this research are as follows:
After the global economic recession in 2008-2009, the discussion about countercyclical and procyclical fiscal policies and their effects on the economy began. Countercyclical fiscal policy is applied to reduce economic fluctuations by adjusting government spending and taxes against the business cycle. The aim of this policy is to stabilize the economy and flatten its fluctuations. On the contrary, procyclical fiscal policy strengthens economic fluctuations in the direction of business cycles. On the other hand, fiscal sustainability refers to the government's ability to maintain expenditures, income and public debt at a certain level in the long term without jeopardizing economic stability or facing a fiscal crisis. A sustainable fiscal policy ensures that the government's debt in the long run is at a level proportional to the size of the economy. The main questions of this research are as follows:
- Is Iran's fiscal policy countercyclical or procyclical?
- Is Iran's fiscal policy sustainable?
- What is the effect of cyclical fiscal policy and fiscal sustainability on the Iranian economic growth?
- How is the mutual relationship between fiscal sustainability and cyclical fiscal policy in Iran?
Methodology
The evaluation of fiscal policy cyclicality and fiscal sustainability and their determinants have been previously researched. However, the effect of cyclical fiscal policy and fiscal sustainability on economic growth and their mutual relationship has not been covered. This research, has utilized Iran's 1970-2021 annual data and a state-space model with time-varying parameters and an autoregressive distributed lags model as well as Kalman filter method. Moreover, to evaluate Iran's cyclical fiscal policy and fiscal sustainability, the effect of cyclical fiscal policy and fiscal sustainability on economic growth have been investigated. The research also deals with the mutual effect between cyclical fiscal policy and fiscal sustainability in Iran.
Findings
In this research, in order to evaluate the cyclical behavior of Iran's fiscal policy and obtaining the index, a state-space model with time-varying parameters, is estimated in which the real GDP logarithm coefficient varies over time. Then, in order to assess Iran's fiscal sustainability and obtaining the index, a state-space model with time-varying parameters is estimated. Finally, an autoregressive distributed lags model is utilized to estimate the effect of cyclical fiscal policy index and fiscal sustainability index on economic growth, as well as estimating the mutual effect between cyclical fiscal policy index and fiscal sustainability index.
Discussion and Conclusion
The findings of this research show: First, Iran's cyclical fiscal policy index estimated in all years is positive and has not recorded a negative number in any year, which means that the fiscal policy implemented in Iran during the period 1970-2021, was procyclical. In other words, the fiscal policy implemented in Iran has increased the range of fluctuations of cycles and for this reason, it has made the Iranian economy vulnerable to the economic shocks. Second, the estimated Iran's fiscal sustainability index is negative in most years so that the average fiscal sustainability index in the entire period is -0.068. This indicates the unsustainability of Iran's fiscal policy in the period 1970-2021. The trend of the smoothed changes of the time-varying parameter related to the fiscal sustainability index is also downward, which means that Iran's fiscal sustainability has been weakening over time and has moved in the direction of unsustainability. Third, Iran's cyclical fiscal policy index has had a negative effect on economic growth. In other words, procyclical behavior of Iran's fiscal policy has slowed down the economic growth rate. Fourth, Iran's fiscal sustainability index has a negative and significant effect on economic growth. Based on the estimated fiscal sustainability index, unsustainability is evident within Iran's fiscal policy. Therefore, unsustainability of Iran's fiscal policy has weakened economic growth. Fifth, Iran's fiscal unsustainability has increased the procyclical behavior of fiscal policy and as a result, exacerbated the fluctuations of economic cycles. Sixth, the increasing Iran's cyclical fiscal policy index reduces the reaction of the primary balance to the government debt. In other words, the increase in the procyclical behavior of the fiscal policy weakens Iran's fiscal sustainability
The evaluation of fiscal policy cyclicality and fiscal sustainability and their determinants have been previously researched. However, the effect of cyclical fiscal policy and fiscal sustainability on economic growth and their mutual relationship has not been covered. This research, has utilized Iran's 1970-2021 annual data and a state-space model with time-varying parameters and an autoregressive distributed lags model as well as Kalman filter method. Moreover, to evaluate Iran's cyclical fiscal policy and fiscal sustainability, the effect of cyclical fiscal policy and fiscal sustainability on economic growth have been investigated. The research also deals with the mutual effect between cyclical fiscal policy and fiscal sustainability in Iran.
Findings
In this research, in order to evaluate the cyclical behavior of Iran's fiscal policy and obtaining the index, a state-space model with time-varying parameters, is estimated in which the real GDP logarithm coefficient varies over time. Then, in order to assess Iran's fiscal sustainability and obtaining the index, a state-space model with time-varying parameters is estimated. Finally, an autoregressive distributed lags model is utilized to estimate the effect of cyclical fiscal policy index and fiscal sustainability index on economic growth, as well as estimating the mutual effect between cyclical fiscal policy index and fiscal sustainability index.
Discussion and Conclusion
The findings of this research show: First, Iran's cyclical fiscal policy index estimated in all years is positive and has not recorded a negative number in any year, which means that the fiscal policy implemented in Iran during the period 1970-2021, was procyclical. In other words, the fiscal policy implemented in Iran has increased the range of fluctuations of cycles and for this reason, it has made the Iranian economy vulnerable to the economic shocks. Second, the estimated Iran's fiscal sustainability index is negative in most years so that the average fiscal sustainability index in the entire period is -0.068. This indicates the unsustainability of Iran's fiscal policy in the period 1970-2021. The trend of the smoothed changes of the time-varying parameter related to the fiscal sustainability index is also downward, which means that Iran's fiscal sustainability has been weakening over time and has moved in the direction of unsustainability. Third, Iran's cyclical fiscal policy index has had a negative effect on economic growth. In other words, procyclical behavior of Iran's fiscal policy has slowed down the economic growth rate. Fourth, Iran's fiscal sustainability index has a negative and significant effect on economic growth. Based on the estimated fiscal sustainability index, unsustainability is evident within Iran's fiscal policy. Therefore, unsustainability of Iran's fiscal policy has weakened economic growth. Fifth, Iran's fiscal unsustainability has increased the procyclical behavior of fiscal policy and as a result, exacerbated the fluctuations of economic cycles. Sixth, the increasing Iran's cyclical fiscal policy index reduces the reaction of the primary balance to the government debt. In other words, the increase in the procyclical behavior of the fiscal policy weakens Iran's fiscal sustainability
Mrs Fatemeh Etemadmoghadam, Dr Majid Sameti, Dr Sara Ghobadi, Dr Mansour Mahinizadeh,
Volume 0, Issue 0 (12-2024)
Volume 0, Issue 0 (12-2024)
Abstract
Aim and Introduction
There are many models and tools to communicate with the international economy and use its capacity to exploit for the benefit of the domestic economy. One of these famous models is the establishment of free zones and attracting international capital through these areas. According to the definition in the Kyoto Convention, a free economic zone is a part of the mainland where the exchange of goods is considered beyond the existing restrictions in the mainland and is not bound by the customs and tax laws of the mainland. Free zones have different economic regulations from other parts of the mainland. The differences can provide the basis for attracting capital, commercial prosperity, and economic growth. To grow and develop these areas, countries use various incentives such as legal, tax, customs, and financial incentives.
Methodology
The term general equilibrium in this method means that all the markets included in this structure must be in balance. In other words, the market settlement condition must be established. This means that in the general equilibrium model, all variables are assumed to be endogenous and non-constant, and this is contrary to the partial equilibrium structure, where the variables of other markets are assumed to be constant. This research analyzes the impact of customs exemption on imported goods in free zones in the form of the DSGE method with a neoclassical pproach. All the relationships necessary to explain the effectiveness of this incentive according to the theoretical foundations, the selected goals of the establishment of regions in Iran and their performance have been stated, and other relationships in other economic sectors have been considered to complete the model. The parameters of the model are also estimated according to the calibration method and using calculation software and econometric estimation. The performance of the model is evaluated by comparing the widths obtained from the simulation of the model and the torques of the real data. Finally, the simulation of the model can be seen by applying impulses.
Findings
In this study, the simulation of customs duty exemption impulses in free zones shows that applying impulses to increase import exemptions to free zones, leads to an increase in foreign direct investment, an increase in capital accumulation, an increase in exports of free zones, and finally, an increase in employment. As the export in free zones increases, the export of products from the mainland decreases.
Discussion and Conclusion
The results of applying the impulse effect of reducing import tariffs in free zones indicate that the intensity of the increase in the exemption of import tariffs for goods to free zones leads to an increase in foreign direct investment, an increase in the amount of investment, an increase in capital accumulation, an increase in the export of free zones and finally, the increased employment rate. In terms of export and domestic production, with the application of tariff reduction, imports in free zones will increase and exports from the mainland will decrease, and due to the weight of exports from the mainland compared to free zones, the total exports of the country will decrease
There are many models and tools to communicate with the international economy and use its capacity to exploit for the benefit of the domestic economy. One of these famous models is the establishment of free zones and attracting international capital through these areas. According to the definition in the Kyoto Convention, a free economic zone is a part of the mainland where the exchange of goods is considered beyond the existing restrictions in the mainland and is not bound by the customs and tax laws of the mainland. Free zones have different economic regulations from other parts of the mainland. The differences can provide the basis for attracting capital, commercial prosperity, and economic growth. To grow and develop these areas, countries use various incentives such as legal, tax, customs, and financial incentives.
Methodology
The term general equilibrium in this method means that all the markets included in this structure must be in balance. In other words, the market settlement condition must be established. This means that in the general equilibrium model, all variables are assumed to be endogenous and non-constant, and this is contrary to the partial equilibrium structure, where the variables of other markets are assumed to be constant. This research analyzes the impact of customs exemption on imported goods in free zones in the form of the DSGE method with a neoclassical pproach. All the relationships necessary to explain the effectiveness of this incentive according to the theoretical foundations, the selected goals of the establishment of regions in Iran and their performance have been stated, and other relationships in other economic sectors have been considered to complete the model. The parameters of the model are also estimated according to the calibration method and using calculation software and econometric estimation. The performance of the model is evaluated by comparing the widths obtained from the simulation of the model and the torques of the real data. Finally, the simulation of the model can be seen by applying impulses.
Findings
In this study, the simulation of customs duty exemption impulses in free zones shows that applying impulses to increase import exemptions to free zones, leads to an increase in foreign direct investment, an increase in capital accumulation, an increase in exports of free zones, and finally, an increase in employment. As the export in free zones increases, the export of products from the mainland decreases.
Discussion and Conclusion
The results of applying the impulse effect of reducing import tariffs in free zones indicate that the intensity of the increase in the exemption of import tariffs for goods to free zones leads to an increase in foreign direct investment, an increase in the amount of investment, an increase in capital accumulation, an increase in the export of free zones and finally, the increased employment rate. In terms of export and domestic production, with the application of tariff reduction, imports in free zones will increase and exports from the mainland will decrease, and due to the weight of exports from the mainland compared to free zones, the total exports of the country will decrease
Dr. Jalal Montazeri Shoorekchali, Dr. Mehdi Zahed Gharavi,
Volume 21, Issue 1 (3-2021)
Volume 21, Issue 1 (3-2021)
Abstract
For more than a century, the causal relationship between government size and economic growth has been a challenging issue in the public sector economics. However, there is no theoretical or empirical consensus among economists on this issue. Accordingly, it seems that the best way to resolve these theoretical and empirical contradictions is experimentally investigation the causal relationship between government size and economic growth in each country. Therefore, this paper investigates the causal relationship between government size and economic growth using the Markov-Switching Granger Causality Approach in Iran over the period 1967-2017. The findings confirmed the existence of a non-linear causal relationship between government size and economic growth and showed that government size had a significant negative effect on economic growth in the form of a two-regime structure (regime Zero: 1966-2002 and regime one:1983-1987), although this negative effect was greater in regime one than in regime zero. This larger negative effect can be rooted in the fact that the share of current expenditure in total government expenditure was significantly larger in the years related to regime one (compared to regime zero). Finally, contrary to Wagner's law, Findings did not confirm the positive and significant effect of economic growth on government size in Iranian economy.
Dr. Hadi Amiri, Dr. Mostafa Mobini_dehkordi, Dr. Alireza Kamalian, Dr. Mehdi Karname Haghighi,
Volume 21, Issue 1 (3-2021)
Volume 21, Issue 1 (3-2021)
Abstract
Regulation is one of the important socioeconomic tasks of governments. Regulation literature focuses on government intervention in the markets and determination of structure and the rules governing it in order to regulate the production and distribution of commodities. The commodity exchange is one of the leading regulatory bodies, which conventionally results in regulating commodities market by providing a convenient, transparent, and observable trading system. The advantage of commodities exchange is the presence of regulatory and supervisory bodies by which all producers, consumers, and traders enjoy the benefits of commodity regulation, but the institutional barriers to competitiveness can, however, prevent the regulation from being effective on prices. This study aims to test the effects of regulating the listed commodities in Iran Mercantile Exchange on commodity price fluctuations. To this end, price movements of 20 commodities traded on Iran Mercantile Exchange are compared with 20 ones not listed in Iran Mercantile Exchange using their coefficient of variation (CV) and Propensity Score Matching method. According to the results, the supply of commodities on the Iran Mercantile Exchange has led to an increase in their price fluctuations compared to similar off-exchange ones. In other words, trading commodities on Iran Mercantile Exchange has not prevented price fluctuations because the institutional barriers to competitiveness affect regulatory facilitation and cause its ineffectiveness.
Nariman Mohammadi, Gholamali Haji, Dr Mohammad Hassan Fotros,
Volume 21, Issue 3 (9-2021)
Volume 21, Issue 3 (9-2021)
Abstract
The relationship between financial decentralization and economic growth has been one of the crucial issues in economics in recent decades. Financial decentralization could affect economic growth and consequently development programs and the expansion of regional balance policies. This study investigates the nonlinear behavior of economic growth and financial decentralization in the Iranian provinces during the period 2004-2016 using a panel smooth transition regression model as one of the prominent models of regime change. A hybrid financial decentralization index is extracted using the principal component analysis technique and it is used as a transfer variable to study the changes in economic growth in the nonlinear model. Results of estimation confirm a nonlinear relationship between the variables under study and propose a dual-regime model with a threshold of 3.1941 and a slope parameter of 4.2869. So, the effect of combined financial decentralization on growth of the provinces is asymmetric. Thus, with increasing decentralization in the first regime, economic growth becomes positive and after crossing the threshold and entering the second regime, it becomes negative due to the costs associated with increasing financial decentralization. Therefore, the relationship between hybrid financial decentralization and the economic growth of the provinces can be shown as an inverse parabola.
Mr. Ali Moftakhari, Dr Mohammad Jafari, Dr Esmaiel Abounoori, Dr Younes Nademi,
Volume 22, Issue 2 (6-2022)
Volume 22, Issue 2 (6-2022)
Abstract
Income inequality and efforts to its reduction it is one of the most important concerns of societies in today's world. On the one hand, countries are looking for revenue sources and, on the other hand, are trying to reduce income inequalities. In addition, due to the unequal distribution of income and the impact of migration contrary to the policies of societies, migration makes it difficult to achieve the desired economic growth. Therefore, considering the importance of the consequences of migration, the main purpose of this paper is to investigate the nonlinear effects of income inequality on brain drain in developing countries. Based on the findings of the study, the inequality in income distribution has a threshold effect on brain drain in developing countries. As long as inequality is at levels below 0.46, this variable has a negative and significant effect on brain drain, but after exceeding the threshold of 0.46 and being in a high inequality regime, the intensification of inequality increases the brain drain sharply. In other words, society tolerates a degree of inequality, but the intensification of inequality beyond the tolerable level of society causes the elites to migrate to developed countries, which are more equal, in search of a better life and proportionate to their capabilities.
Mr. Ahmad Pourmohammadi, Dr Zohre Tabatabaienasab, Yhya Abtahi, Dr Mohammad Ali Dehqantafti,
Volume 22, Issue 3 (9-2022)
Volume 22, Issue 3 (9-2022)
Abstract
The 2008 global financial crisis and the new coronavirus disease (COVID-19) pandemic have attracted interest in the issue of fiscal policy. Since fiscal policy plays an important role in alleviating the costs of these crises, understanding the relationships between fiscal policy components is crucial and has important implications for choosing fiscal policies in the field of public economics. This study aims to examine the causal links between the fiscal policy components, i.e., government expenditures (current and development) and government revenues (tax and oil) in Iran, using quarterly data for the period of 1990:2-2019:1. For this purpose, first, we employ the time domain Toda-Yamamoto causality test to check the causal relationship among these variables. Then, due to the various characteristics of variables in the frequency bands, we implement a dynamic analysis through wavelet coherence approach and wavelet phase-difference in order to explore the joint time-frequency domain causal relationship between government revenues and expenditure categories. The results of the wavelet analysis show that the linkage between the government revenues and expenditures pairs is not the same across all time horizons and a strong heterogeneity in the revealed interrelationships is detected over time and across scales. Overall, the results reveal various causal effects and confirm the expenditure dominance hypothesis for oil revenue, and revenue dominance hypothesis for tax revenue at different frequencies.
Dr. Naeim Shokri, Dr. Abbas Assari Arani, Dr Ali Asgary, Dr Amirhosein Mozayani, Dr Nematollah Akbari,
Volume 22, Issue 4 (12-2022)
Volume 22, Issue 4 (12-2022)
Abstract
Aim and Introduction
The pension system is of special place in the employment regulations of the private and public sectors of all countries of the world. In addition, pension funds are known as one of the most sensitive and complex financial institutions in today's world, whose main goal is to preserve the livelihood and dignity of people in old age. Pension funds have been created to provide social rights for citizens, and a long-term horizon is one of the main features of such funds. By receiving insurance premiums from the insured and investing the resources gathered in the early years and the so-called youth period of the fund, pension funds provide pensions for retirees during their maturity. The process of maturity of pension funds occurs naturally and if it is accompanied by the aging of the country's population, it will intensify. According to the International Monetary Fund, pension expenditures in the Social Security Organization and the civil serpents' Pension Fund will increase from 5.3% in 2015 to 11% in 2040 and 19.6% of GDP in 2080 and in the future, a large part of the country's budget should be spent on paying pensions.
Methodology
This study seeks to simulate and apply corrective policies to improve the financial misalignment in the Iranian pension system using dynamic stochastic general equilibrium (DSGE) model based on the overlapping generations (OLG) model. In this regard, impulse response functions were used to examine the effects of the proposed parametric corrections. The DSGE models are stochastic, microeconomic-founded, provide the possibility of dynamic evaluation of parametric changes as well as random changes of exogenous variables of the system, and give inter-temporal optimization of the behavior of economic agents. In addition, the mechanism of intergenerational transfer in the pension funds, can be well evaluated and studied by these models, so it seems to be a suitable tool for studying the effects of demographic parametric changes on the financial balance of pension funds.
Findings
The results show that positive shocks to the variables of years of service, birth rate, and average years of insurance, the financial misalignment of pension funds decreases. According to the results, linking the retirement age with life expectancy and increasing the years of premium payment can reduce financial misalignment and increase financial stability in the Iranian pension system.
Discussion and Conclusion
The government's decision to implement reforms in Iran's pension system is essential, taking into account social considerations and the step-by-step nature of these reforms. However, according to our findings, the following policies should be presented to improve the financial imbalance of Iran's pension system:
1. The results of the positive shock analysis to the years of service variable showed that the later retirement of people reduces economic dissatisfaction, and considering the past and projected increase in life expectancy in Iran, increasing the retirement age is justified and logical. According to global experience, the average retirement age should be increased from 60 to 63 years for men and from 55 to 58 years for women (one year for every two years). Also, in the future, it is suggested that the average retirement age be linked to the growth of life expectancy.
2. The analysis results of the positive shock to the birth rate variable showed that the young population reduces the financial imbalance. Therefore, it is necessary to implement policies to encourage birth in the coming years, because the population aging phenomenon will have destructive effects on the stability of the pension system.
3. A positive shock to the average variable of years of insurance has positive effects on reducing the financial imbalance of pension funds. In this regard, it is suggested to change the calculation of pensions in all pension funds, including state, military, and social security organizations, based on the average salary of the last three to five years of employment, which it is currently based on the average of the previous two years.
Dr Amir Jabbari, Dr Narges Moradkhani, Mrs. Shiva Habibzadeh,
Volume 23, Issue 2 (5-2023)
Volume 23, Issue 2 (5-2023)
Abstract
Findings
The results show that the rate of social welfare resulting from the imposition of a tax on financial services at the tax rate of 4% (optimal rate) is the highest and the tax rate is 9% for insurance services at the optimal rate.
Discussion and Conclusion
One of the important results of this research is the changes in government tax revenue that stem from taxes on financial and insurance services in Iran. It is observed that tax revenues have increased due to both tax regimes and the tax revenues from the financial services are higher than tax revenues from insurance services. This shows that financial services in Iran economic space have more tax capacity than insurance services.
Looking at the Iranian economy in recent years, it is considered that the economic variables do not depict acceptable conditions. Despite the inflation rate reaching over 47%, it is expected that the Iranian economy will experience a decrease of more than 7% in GDP while the unemployment rate will also increase. Examination of livelihood variables also shows a decline in the consumption level of Iranian households for basic goods. Additionally, during these years, capital accumulation has significantly decreased, and for some production sectors, there is negative capital accumulation.
The mentioned situation of the Iranian economy variables shows that Iran is deviated from its long-term growth path and production capacity in Iran's economy is severely degraded. As a result, Iran's economy will be poorer than before and this poverty will reduce consumption.Considering these economic variables, indicators, and research results, such taxes should be applied with great caution, as based on the current economic realities and welfare of society, it can be said that any new tax base until the relative stabilization of the economy and inflation control would result in reducing the consumption of low-income consumers in favor of the government, leading to more unjustified inflation.
Keywords: Financial Services, Economic Growth, Social Welfare, Taxes, Computable General Equilibrium Model
JEL Classification: C68, F43, G21, H21
The results show that the rate of social welfare resulting from the imposition of a tax on financial services at the tax rate of 4% (optimal rate) is the highest and the tax rate is 9% for insurance services at the optimal rate.
Discussion and Conclusion
One of the important results of this research is the changes in government tax revenue that stem from taxes on financial and insurance services in Iran. It is observed that tax revenues have increased due to both tax regimes and the tax revenues from the financial services are higher than tax revenues from insurance services. This shows that financial services in Iran economic space have more tax capacity than insurance services.
Looking at the Iranian economy in recent years, it is considered that the economic variables do not depict acceptable conditions. Despite the inflation rate reaching over 47%, it is expected that the Iranian economy will experience a decrease of more than 7% in GDP while the unemployment rate will also increase. Examination of livelihood variables also shows a decline in the consumption level of Iranian households for basic goods. Additionally, during these years, capital accumulation has significantly decreased, and for some production sectors, there is negative capital accumulation.
The mentioned situation of the Iranian economy variables shows that Iran is deviated from its long-term growth path and production capacity in Iran's economy is severely degraded. As a result, Iran's economy will be poorer than before and this poverty will reduce consumption.Considering these economic variables, indicators, and research results, such taxes should be applied with great caution, as based on the current economic realities and welfare of society, it can be said that any new tax base until the relative stabilization of the economy and inflation control would result in reducing the consumption of low-income consumers in favor of the government, leading to more unjustified inflation.
Keywords: Financial Services, Economic Growth, Social Welfare, Taxes, Computable General Equilibrium Model
JEL Classification: C68, F43, G21, H21
Dr Saman Ghaderi, Mr. Ramin Amani, Mahabad Amini,
Volume 23, Issue 2 (5-2023)
Volume 23, Issue 2 (5-2023)
Abstract
Aim and Introduction
Nowadays, the environmental impacts of human activities are considered one of the limitations of economic growth. Developing countries are facing the problem of environmental degradation, which hinders economic growth and development. On the other hand, the process of economic development of countries has become one of the environmental challenges and one of the most critical concerns of policymakers over the years. Due to the significant role of the government in the economy of the countries, government economic enterprises are also sources of pollution along with the private sector. The main reason is the unprecedented concentration of greenhouse gases, which leads to the intense and continuous production of carbon dioxide gas. In addition to being a dangerous factor for human health, air pollution also has an economic burden on societies, which causes a decrease in the quality of life and the welfare of society. Thus, developing countries, including Iran, are facing the problem of environmental degradation. Privatization can be a helpful policy and a government tool to influence economic productivity and social welfare through ecological pollution control. Most domestic research on privatisation's impact on environmental pollution has been interview-based and qualitative. For this reason, this research aims to investigate the impact of privatization on carbon dioxide emissions in Iran using the time-varying parameter vector autoregression (TVP – VAR) model. The model is considered dynamic due to the time factor, and the impact of privatization on environmental pollution in Iran can be accurately observed in different years.
Methodology
The present study investigates the impact of privatization on environmental pollution in Iran during 1991-2020 using the data of the Privatization Organization, the Central Bank of Iran, the World Bank, the Globalization Index website, and the energy balance sheet of the Ministry of Energy. Furthermore, the time-varying parameter vector autoregression (TVP – VAR) model has been used to study the relationship between variables. In this method, the optimal interval length of the model was determined first. Then, the data durability was checked through the unit root test of Zivot and Andrews (1992), considering the structural break. The next step examined cointegration tests, serial correlation, variance heteroscedasticity, and polynomial inverse root circle tests. In the end, the results of the impulse response function of the TVP – VAR model were presented. For this purpose, the emission rate of carbon dioxide has been used as an index of pollution, and the value of the transfer of shares and assets from the public sector to the private sector has been considered an index of privatization. The TVP – VAR method, unlike the vector autoregression model, allows the calculation of variable coefficients over time. Due to changing conditions, structural break and cyclical changes were observed in time series in macroeconomics. As a result, the TVP – VAR model enabled us to accurately obtain the nature of the economic structure’s temporal changes.
Findings
In this research, the mechanisms of the impact of privatization on environmental pollution have been analyzed, and the time series data of 1991-2020 and the TVP-VAR model have been used as experimental work. The present research findings show that despite the incomplete, unscientific, and politicized implementation of privatization in Iran, privatization has reduced the emission of carbon dioxide gas in Iran.
Discussion and Conclusion
Based on the results, the relationship between the privatization index and environmental pollution is confirmed. It indicates that privatization has a negative and significant effect on the emission of carbon dioxide in Iran. With the increase of privatization, pollution is decreased because when privatization increases, the productivity of labor and capital and the access to new technology for reducing pollutants is also increased. In developing countries like Iran, economic issues are prioritized over environmental considerations, leading to policymaking without considering environmental costs. In contrast, by including environmental calculations in the studies related to economic policies, it is possible to view the environmental damage caused. Based on the results, it is concluded that the economic globalization index, investment, gross domestic product without oil, and human development index have significant and positive effects on production and carbon dioxide emissions. When the size of the government increases, efficiency and productivity decrease. In Iran, one solution can be importing environment-friendly technologies and more investment in this area. According to the results, it can be seen that the increase in privatization can reduce greenhouse gases, and this is due to the rise in the efficiency of private companies in the exploitation and optimal use of natural resources. Thus, policymakers can consider privatization as a part of the solution to fight environmental pollution.
Keywords: Privatization, Environmental Pollution, Time-Varying Parameter Vector Autoregression (TVP – VAR), Iran
JEL Classification: C22, L33, Q53
The Key to Solve the Corruption problem: Gender, Government, Religionsand Their Impact on Each Other
Mrs. Naime Hamidi, Dr Karim Azarbayejani, Dr Morteza Sameti,
Volume 23, Issue 2 (5-2023)
Volume 23, Issue 2 (5-2023)
Abstract
Aim and Introduction
In recent years, economists have come to recognize that corruption is not just a deviation or a hurt; it is a systemic feature of many economies, which constitutes a significant impediment to economic growth and development. The present article tries to answer this question: does corruption more depended on gender or institutional factors? Today with the spread of corruption, its negative effects have overshadowed many economic, social and political aspects and have led to reduced efficiency. The international community considers corruption as an economic and social complication and many thinkers in economic, social, political and psychological sciences are studying its causes and consequences. Studies have expanded to such an extent that in the study of (Dollar et al., 2001), women are considered as myth of transparency for reasons such as lower risk averse than men and less meet with corrupt activities because they enter the labor market later than men. In this regard, (Karimi et al., 2018), also concluded that with the increase of women participation in the public sector, corruption will decrease. Therefore, less gender inequality in the economy and politics leads to the less corruption. But according to a Europol report in 2019, " Crime has no gender." Therefore, this study investigates the issue in a different atmosphere from gender behavior and examines the issue in the framework of institutions. The present article investigates the gender behaviors of human in framework of government performance and religions. Corruption as a social complication has many negative economic effects such as reduced investment, economic growth, etc. (Tanzi, 1998). Therefore, it is rejected by all religions because of religion can influence human behavior and actions. Finally, a substantial body of recent research looks at differences in the behavior of men and women in diverse economic transactions. We contribute to this literature by investigating gender differences. So, this article tries to study the gender behaviors of human. This study shows that Islam and Christianity have no significant effect on relation between corruption and gender inequality index. But all the results showed that government performance does influence this relation. Also, the robustness test strongly confirmed the results of the study.
Methodology
The data are drawn from a wide range of sources. There are two major measures of corruption: Corruption Perceptions Index (CPI), that is the inverse of transparency, Anti-Money Laundering/Counter-Financing of Terrorism (AML). The CPI was obtained from Transparency International (TI), and it ranges from 0 to 10 where low values indicate high transparency and low corruption. Gender Inequality Index (GII) was used as gender index. Our data set contains 89 countries over 10 years (from 2008 to 2017). This study used the dynamic panel data approach, system generalized method of moments (GMM-SYSTEM) and Panel vector autoregressive model (PVAR) to examine the relationship between corruption and gender inequality, where the government performance and religions (Islam and Christianity) can link between corruption and gender inequality. In order to investigate the effect of countries (cross-sections), two groups of Muslim and Christian countries have been used. However, in order to investigate government performance effect on relation between corruption and gender inequality and examine robustness test the results of the study used two groups of instrument variables. The first group is the worldwide governance indicators (WGI) and second group is Fraser institute indicators.
Findings
In order to answer the question, does corruption more depend on gender or institutional factors? Despite the behavioral specifications of women, the rate of corruption in women is lower than men (Dollar et al., 2001). We find by System Generalized Method of Moments strong evidence about this prediction. Results show that women’s participation decreases corruption and that corruption decreases women’s participation in government; and both effects are substantively significant. However, the estimation results of the systems studied in the present article confirm that the relationship between corruption index and gender inequality is significantly affected by the way the government works. While religions have no effect on how the index of corruption and gender inequality affect each other. Therefore, it can be said that government performance is a missing loop in relationship between corruption and gender and its effects are statistically significant.
Discussion and Conclusion
Corruption is a historical, important and effective phenomenon. There is extensive researches about the factors of corruption. The social science literature indicates that women may be more honest or more risk averse and may have higher standards of ethical behavior and may be more concerned with the common good in comparison with men. This would imply that women are more willing to sacrifice private profit for the public good and this would be especially important for political and public life. Does greater participation of women in the public sector cause decreased corruption, or does greater corruption in government cause lower participation of women in government? In this study, our overall impression is that the evidence supports both propositions. So, the major aim in article is to explain the gender behavior of human to do corrupt activity in the formwork of government and religions using the dynamic panel data approach. Thus, this study used statistical data from 89 countries during 2008-2017, two corruption indicators, two groups of instrument variables and two groups of countries. The selection of countries was based on access to statistical data. The estimations show that religion has no significant effect on corruption and gender inequality index, i.e. Islam and Christianity have no significant effect on relation between corruption and gender inequality index. This study also investigated the impact of government performance on relation between two indices. In all systems, Sargan test has been confirmed. In summary, the results of estimated systems indicate that government institution is a missing loop in relationship between corruption and gender and its effects are statistically significant.
Keywords: Corruption, Money Laundering, Gender, religion, Government
JEL Classification: H11, H12, J08, J16, J18, O11
In recent years, economists have come to recognize that corruption is not just a deviation or a hurt; it is a systemic feature of many economies, which constitutes a significant impediment to economic growth and development. The present article tries to answer this question: does corruption more depended on gender or institutional factors? Today with the spread of corruption, its negative effects have overshadowed many economic, social and political aspects and have led to reduced efficiency. The international community considers corruption as an economic and social complication and many thinkers in economic, social, political and psychological sciences are studying its causes and consequences. Studies have expanded to such an extent that in the study of (Dollar et al., 2001), women are considered as myth of transparency for reasons such as lower risk averse than men and less meet with corrupt activities because they enter the labor market later than men. In this regard, (Karimi et al., 2018), also concluded that with the increase of women participation in the public sector, corruption will decrease. Therefore, less gender inequality in the economy and politics leads to the less corruption. But according to a Europol report in 2019, " Crime has no gender." Therefore, this study investigates the issue in a different atmosphere from gender behavior and examines the issue in the framework of institutions. The present article investigates the gender behaviors of human in framework of government performance and religions. Corruption as a social complication has many negative economic effects such as reduced investment, economic growth, etc. (Tanzi, 1998). Therefore, it is rejected by all religions because of religion can influence human behavior and actions. Finally, a substantial body of recent research looks at differences in the behavior of men and women in diverse economic transactions. We contribute to this literature by investigating gender differences. So, this article tries to study the gender behaviors of human. This study shows that Islam and Christianity have no significant effect on relation between corruption and gender inequality index. But all the results showed that government performance does influence this relation. Also, the robustness test strongly confirmed the results of the study.
Methodology
The data are drawn from a wide range of sources. There are two major measures of corruption: Corruption Perceptions Index (CPI), that is the inverse of transparency, Anti-Money Laundering/Counter-Financing of Terrorism (AML). The CPI was obtained from Transparency International (TI), and it ranges from 0 to 10 where low values indicate high transparency and low corruption. Gender Inequality Index (GII) was used as gender index. Our data set contains 89 countries over 10 years (from 2008 to 2017). This study used the dynamic panel data approach, system generalized method of moments (GMM-SYSTEM) and Panel vector autoregressive model (PVAR) to examine the relationship between corruption and gender inequality, where the government performance and religions (Islam and Christianity) can link between corruption and gender inequality. In order to investigate the effect of countries (cross-sections), two groups of Muslim and Christian countries have been used. However, in order to investigate government performance effect on relation between corruption and gender inequality and examine robustness test the results of the study used two groups of instrument variables. The first group is the worldwide governance indicators (WGI) and second group is Fraser institute indicators.
Findings
In order to answer the question, does corruption more depend on gender or institutional factors? Despite the behavioral specifications of women, the rate of corruption in women is lower than men (Dollar et al., 2001). We find by System Generalized Method of Moments strong evidence about this prediction. Results show that women’s participation decreases corruption and that corruption decreases women’s participation in government; and both effects are substantively significant. However, the estimation results of the systems studied in the present article confirm that the relationship between corruption index and gender inequality is significantly affected by the way the government works. While religions have no effect on how the index of corruption and gender inequality affect each other. Therefore, it can be said that government performance is a missing loop in relationship between corruption and gender and its effects are statistically significant.
Discussion and Conclusion
Corruption is a historical, important and effective phenomenon. There is extensive researches about the factors of corruption. The social science literature indicates that women may be more honest or more risk averse and may have higher standards of ethical behavior and may be more concerned with the common good in comparison with men. This would imply that women are more willing to sacrifice private profit for the public good and this would be especially important for political and public life. Does greater participation of women in the public sector cause decreased corruption, or does greater corruption in government cause lower participation of women in government? In this study, our overall impression is that the evidence supports both propositions. So, the major aim in article is to explain the gender behavior of human to do corrupt activity in the formwork of government and religions using the dynamic panel data approach. Thus, this study used statistical data from 89 countries during 2008-2017, two corruption indicators, two groups of instrument variables and two groups of countries. The selection of countries was based on access to statistical data. The estimations show that religion has no significant effect on corruption and gender inequality index, i.e. Islam and Christianity have no significant effect on relation between corruption and gender inequality index. This study also investigated the impact of government performance on relation between two indices. In all systems, Sargan test has been confirmed. In summary, the results of estimated systems indicate that government institution is a missing loop in relationship between corruption and gender and its effects are statistically significant.
Keywords: Corruption, Money Laundering, Gender, religion, Government
JEL Classification: H11, H12, J08, J16, J18, O11
Dr Mostafa Dinmohammadi, Mrs. Zeynab Farhadi,
Volume 23, Issue 3 (8-2023)
Volume 23, Issue 3 (8-2023)
Abstract
Aim and Introduction What is the status of the Parliament’s changes in public spending? In what fields is it? Or even when it takes place? The answers to these questions are analyzed in the context of the political economy of the budget in the parliament. The political economy of the budget observes the function of goals different from efficiency and effectiveness in the budgeting process, which imposes itself on the goals of budgeting. When the budget bill is sent to the parliament by the government, it is exposed to the demands of the representatives of different geographical areas. In the analysis of the public sector, there has been a literature called “pork barrel”, which has observed the role of political and legislative institutions in changing the public budget in line with regional and party political goals. Pork barrel was originally meant to store meat. Methodology This study tries to use the theoretical approach of pork barrel and field studies to investigate and analyze the process of changes in the structure of public credits of government investments, which is known as the capital assets acquisition budget of the government bill in the parliament in Iran. This study requires knowing the status of budget changes in the parliament. On the other hand, the evaluation of the considerations of the pork barrel literature regarding the budget of public credits, the acquisition of capital assets, also takes into account the changes in the budget presented to the parliament compared to the budget approved by the parliament. The present study is an applied research in terms of type and a descriptive one in terms of method. In this study, the qualitative changes of the parliament in the rulings of the single article and the budget notes have not been addressed, and only the quantitative (Rials) changes in the appropriations tables for the acquisition of capital assets in the budget have been considered. The data of this study have been calculated and extracted for the first time. The review period of macro and total budget figures covers a 25-year period from 1997-2022, and micro-indexes and budget lines include a 13-year period from 2009-2022. Results and Discussion The findings of this study show that the share of the parliament in the change in credits for the acquisition of capital assets was 36% during the review period. The calculated index shows that the parliament in Iran significantly changes the budget bill and about one third of the budget changes are made by the parliament. The issue of how much the parliament is allowed to change in the bill presented by the government is one of the most challenging issues in the political system in Iran. The Parliament's approach to changes in appropriations for the acquisition of capital assets in the budget bill has often been to increase appropriations. About 88% of the Parliament's changes in the budget lines of capital asset acquisition have been in order to increase the validity of the existing stable lines and create new construction lines. The issue of roads, water supply and distribution has been the main priority axes of the representatives to press and request to change and increase property acquisition credits in the parliament. Parliament's changes in the bill have increased significantly in the second half of the study period. This issue is related to the change in the composition of the consolidation commission and the government's relationship with the parliament. The exclusive role of the Consolidation Commission and its effective members provides a wide possibility to apply rent-seeking behaviors in the bill. The inferential analysis of the research results shows that the pork barrel approach is confirmed in the budget bill changes by the parliament during the review period. By definition, in the pork barrel approach, credit is used from national sources with a regional approach. In terms of the time structure of political changes in the parliament and the government, the first year of each new parliament period coincides with the last year of the incumbent government or the fourth year of the government. The results indicate that the highest volume of changes in the appropriations for the acquisition of capital assets in the law compared to the bill occurs in the years of political change of the government and parliament (the first year of the beginning of the parliament), which is the last year of the government. The findings of the study show that the size of the changes in the growth of the asset acquisition budget is not affected by the political alignment between the parliament and the government, which can be due to the dependence of the budget on oil and the non-partisan system of the parliament. Conclusion The summary of the results shows that the parliament in Iran has a very strong and direct role in the changes of the budget bill, although these changes are not due to the dominance of the pork barrel approach in line with the public and macro interests in the national economy. Since one of the most important debates regarding the amendment of the budget bill is related to the amendment and organization of the budget bill formulation and approval process, it is necessary to make meaningful amendments in the bill review model in the parliament. Of course, representatives usually do not pass laws that limit their powers. In this case, there is a need for national and interagency consensus in correcting the budget review path in line with the interests and macro goals and the trans-local and regional approach.
Dr Bagher Darvishi,
Volume 23, Issue 4 (12-2023)
Volume 23, Issue 4 (12-2023)
Abstract
Introduction:
In order to target the limited budgets of poverty alleviation programs and increase their efficiency, a wide range of targeting methods including means testing, proxy means testing, categorical targeting, geographical targeting, self-targeting, and community-based targeting has been used in developing countries (Coady, Grosh and Hoddinott, 2004). However, targeting in Iran, in the best case, has been based on the proxy means testing. Kidd and Wylde (2011) have criticized this method due to lack of transparency and poor predictions in the field of identifying the poor. The main purpose of this article is to compare the different economic and social characteristics of Iran’s rural households with the aim of finding the best characteristics in order to target subsidies in Iran. In this context, the following questions are raised: In a situation where accurate information about household income or expenses is not available, how should households be prioritized to receive subsidies based on their characteristics? How much cash subsidy should each household receive in order to reduce the aggregate poverty? To answer these questions, by following, Kanbur (1987), Ravallion and Chao (1989), Elbers, Fujii, Lanjouw, Özler and Yin (2007), Glewwe (1992) and Araar and Luca (2019), I use a new numerical algorithm, which acts as optimal poverty group targeting. This method is conceived to find the optimal group transfers that allow the largest possible reduction in any additive poverty indexes, like the Foster, Greer, Thorbecke (FGT) class of poverty indexes.
Methodology:
This article uses a new numerical algorithm, which acts as optimal poverty group targeting. This method was first presented by Kanbur (1987), which focused on the theoretical rules of optimization. Then, based on the theoretical findings of Kanbur (1987), Ravallion and Chao (1989) have proposed numerical method that maximizes the reduction in the FGT (α =2)
Results and Discussion:
In this article, economic and social characteristics of rural households in Iran were compared to targeted poverty alleviation programs. Based on the results, for the head count ratio, the targeting efficiency based on different household characteristics changes between 23.67 and 31.03 %, the population coverage rate changes between 38.93 and 100 %, and the sum of the inclusion and exclusion errors changes between 41.62 and 52.53%. Now, if the targeting is done based on the poverty gap index, the targeting efficiency will be between 42.18 and 48.02 %, the population coverage rate will be between 86.21 and 100 %, and the sum of the exclusion and inclusion errors will be between 46.96 and 52.53%. Finally, if the poverty severity index is used as the basis for targeting, the targeting efficiency will change between 53.99 and 59.51 %, the population coverage rate will change between 99.33 and 100 %, and the sum of the inclusion and exclusion errors will change between 48.92 and 52.53%. It is interesting to note that in targeting based on all three mentioned poverty indicators, the family size, number of members under 7 years old and the education of the household head are always the best characteristics for targeting poverty.
Conclusion:
The main purpose of this article is to compare the different economic and social characteristics of rural households with the aim of identifying the best characteristics in order to targeting subsidies in Iran. According to the results of this article, the characteristic that should be taken into account in targeting is the family size, which the efficiency of targeting based on this characteristic is equal to 51.59% of targeting with complete information. The rate of exclusion and inclusion errors are zero and 52.53%, respectively. Finally, in the targeting based on the family size and squared poverty gap index, the population coverage rate is 100, which is very acceptable from the social point of view. Paying attention to the changes in the poverty indices based on the household demographic characteristics is very important, because if the family size increases, the poverty indices grow strongly. As a result, the headcount, poverty gap and squared poverty gap indexes for families with six and more people become 2.5, 3.5 and 2.4 times the same index for households with 1-2 people, respectively.
In order to target the limited budgets of poverty alleviation programs and increase their efficiency, a wide range of targeting methods including means testing, proxy means testing, categorical targeting, geographical targeting, self-targeting, and community-based targeting has been used in developing countries (Coady, Grosh and Hoddinott, 2004). However, targeting in Iran, in the best case, has been based on the proxy means testing. Kidd and Wylde (2011) have criticized this method due to lack of transparency and poor predictions in the field of identifying the poor. The main purpose of this article is to compare the different economic and social characteristics of Iran’s rural households with the aim of finding the best characteristics in order to target subsidies in Iran. In this context, the following questions are raised: In a situation where accurate information about household income or expenses is not available, how should households be prioritized to receive subsidies based on their characteristics? How much cash subsidy should each household receive in order to reduce the aggregate poverty? To answer these questions, by following, Kanbur (1987), Ravallion and Chao (1989), Elbers, Fujii, Lanjouw, Özler and Yin (2007), Glewwe (1992) and Araar and Luca (2019), I use a new numerical algorithm, which acts as optimal poverty group targeting. This method is conceived to find the optimal group transfers that allow the largest possible reduction in any additive poverty indexes, like the Foster, Greer, Thorbecke (FGT) class of poverty indexes.
Methodology:
This article uses a new numerical algorithm, which acts as optimal poverty group targeting. This method was first presented by Kanbur (1987), which focused on the theoretical rules of optimization. Then, based on the theoretical findings of Kanbur (1987), Ravallion and Chao (1989) have proposed numerical method that maximizes the reduction in the FGT (
Results and Discussion:
In this article, economic and social characteristics of rural households in Iran were compared to targeted poverty alleviation programs. Based on the results, for the head count ratio, the targeting efficiency based on different household characteristics changes between 23.67 and 31.03 %, the population coverage rate changes between 38.93 and 100 %, and the sum of the inclusion and exclusion errors changes between 41.62 and 52.53%. Now, if the targeting is done based on the poverty gap index, the targeting efficiency will be between 42.18 and 48.02 %, the population coverage rate will be between 86.21 and 100 %, and the sum of the exclusion and inclusion errors will be between 46.96 and 52.53%. Finally, if the poverty severity index is used as the basis for targeting, the targeting efficiency will change between 53.99 and 59.51 %, the population coverage rate will change between 99.33 and 100 %, and the sum of the inclusion and exclusion errors will change between 48.92 and 52.53%. It is interesting to note that in targeting based on all three mentioned poverty indicators, the family size, number of members under 7 years old and the education of the household head are always the best characteristics for targeting poverty.
Conclusion:
The main purpose of this article is to compare the different economic and social characteristics of rural households with the aim of identifying the best characteristics in order to targeting subsidies in Iran. According to the results of this article, the characteristic that should be taken into account in targeting is the family size, which the efficiency of targeting based on this characteristic is equal to 51.59% of targeting with complete information. The rate of exclusion and inclusion errors are zero and 52.53%, respectively. Finally, in the targeting based on the family size and squared poverty gap index, the population coverage rate is 100, which is very acceptable from the social point of view. Paying attention to the changes in the poverty indices based on the household demographic characteristics is very important, because if the family size increases, the poverty indices grow strongly. As a result, the headcount, poverty gap and squared poverty gap indexes for families with six and more people become 2.5, 3.5 and 2.4 times the same index for households with 1-2 people, respectively.
Mr Ahmad Pourmohammadi, Dr Zohreh Tabatabaiie Nasab, Dr Yhya Abtahi, Dr Mohammad Ali Dehqantafti,
Volume 24, Issue 2 (5-2024)
Volume 24, Issue 2 (5-2024)
Abstract
Introduction
Despite the increasing debate around the role of alternative renewable sources of energy such as solar and nuclear power, oil still has a central role for a vast portion of the world’s countries. Therefore, oil price is one of the key prices in the international economy, and its effects and mechanisms on macroeconomic variables has been an important topic of economic research. In oil-exporting countries, oil price fluctuations have implications for all macroeconomic and prudential policies but due to the government ownership of natural resources, fiscal policy is especially important and can be a main mechanism for transferring these fluctuations to the economy. In this regard, this study aims to analyze the complex relationships and dynamic co-movements between international oil price movements and macroeconomic variables, emphasizing the role of fiscal policy in a time-frequency approach in the years 1978-2020. For this purpose, we implement two novel wavelet analysis techniques, namely, multiple wavelet coherence (MWC) and partial wavelet coherence (PWC), which are used to explore the real relationship between variables. The use of the wavelet tool is superior to traditional tools because it allows the analyst to determine how the series interact at different frequencies and how they evolve over time. To the best of our knowledge, the current is the first paper to implement the wavelet framework to analyze the effects of oil price dynamics on macroeconomic variables in Iran. Therefore, this study makes a modest contribution to the empirical literature by unveiling the main transmission mechanism of oil prices at different time horizons.
Methodology
The econometrics techniques that have been previously used are focused on time domain analysis. This analysis may return incomplete and ambiguous information on the relationship between economic variables. Therefore, this study is focused on time and frequency domain analysis using the wavelet transformation approach that has been left out for the relationship dynamics among these variables.
The origin of wavelets can be traced back to Fourier analysis, which is the foundation of modern time-frequency analysis. Fourier transform, examine the periodicity of phenomena by assuming that they are stationary in time. But most economic and financial time series exhibit quite complicated patterns over time. The wavelet transform approach was introduced to overcome the limitations of the Fourier transform. In fact, if the frequency components are not stationary traditional spectral tools may miss such frequency components. The wavelet analyses do not follow the initial checks to observe if the series have unit root or not. The superior feature of the wavelet analysis is related to its flexibility in monitoring several non-stationary signals.
Wavelet Analysis is a method that allows simultaneous decomposition of original time series according to both time and frequency domains. This is very important for economics and finance, as many of the variables in this field can operate and interact differently on dissimilar time scales. So, in this paper, we used two innovative wavelet approaches to study and compare the interdependence between oil prices, non-oil GDP, public expenditure, and trade balance. This approach implements the estimation of the spectral features of time series as a function of time, displaying how the various periodic components of time series vary through time. To check the relevance of the coherence of multiple independents on a dependent one, we use multiple wavelet coherence (MWC), a similar method to the multiple correlations. The partial correlation is one of the tools that can be used in a simple correlation concept. In the wavelet, the researchers can attain this using partial wavelet coherence (PWC). This approach is able to identify the partial wavelet coherence between the two-time series y and x1 after eliminating the influence of the third time series x2. Hence, we use partial wavelet coherence to identify the wavelet coherence between oil prices and government expenditure when canceling out the effect of non-oil GDP and trade balance.
Results and Discussion
The results of the wavelet analysis show that there is a strong coherence between oil prices and the macroeconomic variables at different frequencies. multiple wavelet coherence, shows a high coherency between the four variables in the short-run (1-4 years) and in the long-run horizons (8-16 years). In fact, multiple wavelet coherence between variables shows that there is always a relationship between variables over time and different scales with different coefficients.
Partial wavelet coherence between oil and non-oil GDP has been significant by removing the effects of government expenditure in the short term during the years 1988 to 1992 and also 2000 to 2012. In the scale of 6 to 8 years from 2010, the partial coherence shows an approximate value of 0.6, which is maintained at this frequency until the end of the period. This issue shows the greater correlation between oil price fluctuations and non-oil GDP by removing the effects of fiscal policy fluctuations in these years. Also, by removing the effects of the trade balance, there is a partial wavelet coherence between the pairs of oil price and non-oil GDP from 1996 to 2012 in the short-term time horizon.
The partial wavelet coherence between oil price and trade balance by removing the effect of fiscal policy and also by removing the effect of non-oil GDP indicates a limited relationship between the pair of oil price and trade balance by removing the effects of other two variables during the study period. In both cases, the relationship between the two variables is limited to the early years of the study period, and there is no independent relationship in other areas.
The results of the partial wavelet coherence between oil price and government expenditure showed that by removing the effect of non-oil GDP, the highest correlation of the variable occurred in the short-term and medium-term region. In the short-term time horizon, during the years 1979 to 1992, a strong wavelet coherence can be seen between the oil prices and government expenditure, which was repeated during the years 2010 to 2011. Also, by keeping the variable effects of the trade balance constant until the end of the 80s, there is a co-movement between oil price and government expenditure independent of the effects of the trade balance. This net correlation between the two variables well indicates the role of fiscal policy in the transmission of oil price fluctuations in multiple time scales.
Conclusion
The most important effective factor in increasing oil price fluctuations is the unforeseen and increasing risks related to oil and its related industries. Since the world has seen rapid and successive developments in recent years (including the spread of disease, war, etc.), severe fluctuations have been observed in the global oil markets during these years. Therefore, in a fluctuating environment, oil prices have forced governments and policymakers to formulate policies to deal with the uncertainty of oil prices. To implement such policies, it will be useful to examine the relationship between oil price dynamics and its transmission mechanisms in the economy. In this regard, the present article analyzes the relationship between oil price dynamics and macroeconomic variables, emphasizing the role of fiscal policy in Iran through time-frequency analysis and the new approach of multiple and partial wavelet coherence.
The results of multiple wavelet coherence show the co-movement between oil price and other variables of the model in different time scales. In such a way that this co-movement shows the greatest intensity in short and long-time horizons. Also, the partial wavelet correlation results between the variables of oil price and non-oil GDP as well as government expenditures showed that by removing the effects of other variables, the co-movement between the pair of variables can still be observed in all time horizons. While regarding the trade balance, this net relationship with oil price was not observed.
In general, based on the partial wavelet coherence results, it can be shown that fiscal policy and economic growth are the main channels of oil price fluctuations transmission in this period, which are in line with the studies of Hossein et al. (2008) and El Anshasi (2008) who showed that Fiscal policies are the main propagation mechanism that transmits the oil price shocks to the economy.
Therefore, the reduction of oil price correlation by removing the effects of fiscal policy and business cycles shows the importance of the channel of fiscal policy and GDP in the transmission of oil price fluctuations. Therefore, it is recommended that the policymakers who adjust various economic stabilization schemes for greater stability, while paying attention to the main channels of oil financial resources flowing into the economy, should consider different frequency bands as well.
Despite the increasing debate around the role of alternative renewable sources of energy such as solar and nuclear power, oil still has a central role for a vast portion of the world’s countries. Therefore, oil price is one of the key prices in the international economy, and its effects and mechanisms on macroeconomic variables has been an important topic of economic research. In oil-exporting countries, oil price fluctuations have implications for all macroeconomic and prudential policies but due to the government ownership of natural resources, fiscal policy is especially important and can be a main mechanism for transferring these fluctuations to the economy. In this regard, this study aims to analyze the complex relationships and dynamic co-movements between international oil price movements and macroeconomic variables, emphasizing the role of fiscal policy in a time-frequency approach in the years 1978-2020. For this purpose, we implement two novel wavelet analysis techniques, namely, multiple wavelet coherence (MWC) and partial wavelet coherence (PWC), which are used to explore the real relationship between variables. The use of the wavelet tool is superior to traditional tools because it allows the analyst to determine how the series interact at different frequencies and how they evolve over time. To the best of our knowledge, the current is the first paper to implement the wavelet framework to analyze the effects of oil price dynamics on macroeconomic variables in Iran. Therefore, this study makes a modest contribution to the empirical literature by unveiling the main transmission mechanism of oil prices at different time horizons.
Methodology
The econometrics techniques that have been previously used are focused on time domain analysis. This analysis may return incomplete and ambiguous information on the relationship between economic variables. Therefore, this study is focused on time and frequency domain analysis using the wavelet transformation approach that has been left out for the relationship dynamics among these variables.
The origin of wavelets can be traced back to Fourier analysis, which is the foundation of modern time-frequency analysis. Fourier transform, examine the periodicity of phenomena by assuming that they are stationary in time. But most economic and financial time series exhibit quite complicated patterns over time. The wavelet transform approach was introduced to overcome the limitations of the Fourier transform. In fact, if the frequency components are not stationary traditional spectral tools may miss such frequency components. The wavelet analyses do not follow the initial checks to observe if the series have unit root or not. The superior feature of the wavelet analysis is related to its flexibility in monitoring several non-stationary signals.
Wavelet Analysis is a method that allows simultaneous decomposition of original time series according to both time and frequency domains. This is very important for economics and finance, as many of the variables in this field can operate and interact differently on dissimilar time scales. So, in this paper, we used two innovative wavelet approaches to study and compare the interdependence between oil prices, non-oil GDP, public expenditure, and trade balance. This approach implements the estimation of the spectral features of time series as a function of time, displaying how the various periodic components of time series vary through time. To check the relevance of the coherence of multiple independents on a dependent one, we use multiple wavelet coherence (MWC), a similar method to the multiple correlations. The partial correlation is one of the tools that can be used in a simple correlation concept. In the wavelet, the researchers can attain this using partial wavelet coherence (PWC). This approach is able to identify the partial wavelet coherence between the two-time series y and x1 after eliminating the influence of the third time series x2. Hence, we use partial wavelet coherence to identify the wavelet coherence between oil prices and government expenditure when canceling out the effect of non-oil GDP and trade balance.
Results and Discussion
The results of the wavelet analysis show that there is a strong coherence between oil prices and the macroeconomic variables at different frequencies. multiple wavelet coherence, shows a high coherency between the four variables in the short-run (1-4 years) and in the long-run horizons (8-16 years). In fact, multiple wavelet coherence between variables shows that there is always a relationship between variables over time and different scales with different coefficients.
Partial wavelet coherence between oil and non-oil GDP has been significant by removing the effects of government expenditure in the short term during the years 1988 to 1992 and also 2000 to 2012. In the scale of 6 to 8 years from 2010, the partial coherence shows an approximate value of 0.6, which is maintained at this frequency until the end of the period. This issue shows the greater correlation between oil price fluctuations and non-oil GDP by removing the effects of fiscal policy fluctuations in these years. Also, by removing the effects of the trade balance, there is a partial wavelet coherence between the pairs of oil price and non-oil GDP from 1996 to 2012 in the short-term time horizon.
The partial wavelet coherence between oil price and trade balance by removing the effect of fiscal policy and also by removing the effect of non-oil GDP indicates a limited relationship between the pair of oil price and trade balance by removing the effects of other two variables during the study period. In both cases, the relationship between the two variables is limited to the early years of the study period, and there is no independent relationship in other areas.
The results of the partial wavelet coherence between oil price and government expenditure showed that by removing the effect of non-oil GDP, the highest correlation of the variable occurred in the short-term and medium-term region. In the short-term time horizon, during the years 1979 to 1992, a strong wavelet coherence can be seen between the oil prices and government expenditure, which was repeated during the years 2010 to 2011. Also, by keeping the variable effects of the trade balance constant until the end of the 80s, there is a co-movement between oil price and government expenditure independent of the effects of the trade balance. This net correlation between the two variables well indicates the role of fiscal policy in the transmission of oil price fluctuations in multiple time scales.
Conclusion
The most important effective factor in increasing oil price fluctuations is the unforeseen and increasing risks related to oil and its related industries. Since the world has seen rapid and successive developments in recent years (including the spread of disease, war, etc.), severe fluctuations have been observed in the global oil markets during these years. Therefore, in a fluctuating environment, oil prices have forced governments and policymakers to formulate policies to deal with the uncertainty of oil prices. To implement such policies, it will be useful to examine the relationship between oil price dynamics and its transmission mechanisms in the economy. In this regard, the present article analyzes the relationship between oil price dynamics and macroeconomic variables, emphasizing the role of fiscal policy in Iran through time-frequency analysis and the new approach of multiple and partial wavelet coherence.
The results of multiple wavelet coherence show the co-movement between oil price and other variables of the model in different time scales. In such a way that this co-movement shows the greatest intensity in short and long-time horizons. Also, the partial wavelet correlation results between the variables of oil price and non-oil GDP as well as government expenditures showed that by removing the effects of other variables, the co-movement between the pair of variables can still be observed in all time horizons. While regarding the trade balance, this net relationship with oil price was not observed.
In general, based on the partial wavelet coherence results, it can be shown that fiscal policy and economic growth are the main channels of oil price fluctuations transmission in this period, which are in line with the studies of Hossein et al. (2008) and El Anshasi (2008) who showed that Fiscal policies are the main propagation mechanism that transmits the oil price shocks to the economy.
Therefore, the reduction of oil price correlation by removing the effects of fiscal policy and business cycles shows the importance of the channel of fiscal policy and GDP in the transmission of oil price fluctuations. Therefore, it is recommended that the policymakers who adjust various economic stabilization schemes for greater stability, while paying attention to the main channels of oil financial resources flowing into the economy, should consider different frequency bands as well.
Mr Yahya Mohaghegh, Dr Hashem Zare, Dr Mehrzad Ebrahimi,
Volume 24, Issue 4 (12-2024)
Volume 24, Issue 4 (12-2024)
Abstract
Aim and Introduction
The world has suffered severe environmental degradation in the last two decades. The effects of ecological deviations and environmental destruction are alarming and cause concern for stakeholders and environmentalists. These problems have led to environmental disasters such as extreme weather changes and rising sea levels. For this reason, countries are trying to address environmental crises and economic growth at the same time. Basically, it is believed that the destruction of ecosystems in many countries is the result of human actions, including rapid industrialization, population growth, expansion of economic activities, urbanization, and widespread consumption of fossil fuels. Undoubtedly, one of the main factors of climate change and environmental degradation is the emission of carbon dioxide (CO2) caused by economic activities. The relationship between carbon dioxide emissions and economic growth has attracted the attention of researchers and policymakers to reduce carbon dioxide emissions without affecting economic growth. Achieving this goal may be difficult, but studies have included various factors in the growth-carbon dioxide relationship, such as different energy sources, technological innovations, population, financial development, urbanization, and trade openness. In addition to the factors mentioned above, there is a need to assess other relevant factors such as human capital for effective policy development. Despite the extensive role of human capital in promoting energy efficiency and economic growth, by skilled workers in the production process and the preference of educated households to use home appliances with high energy efficiency, few researchers have included this factor in the existing literature. Education is considered as one of the most important human capital investments and plays a vital role in the process of economic growth. Education, at the micro level, affects the future income flow of people, and at the macro level, it is thought that a workforce with better education increases the stock of human capital in the economy. Increased human capital in turn can have positive externalities, such as lower crime or improved health outcomes, which are socially desirable and likely to have positive effects on productivity. In fact, it is the existence of such positive externalities that provides economic justification for governments to support education. It is believed that public spending on education and health will lead to improvement of human capital, reduction of poverty, economic growth and development, and reduction of pollution.
Theoretical studies emphasize different mechanisms through which education affects economic growth. (1) Education increases the human capital of the labor force, thereby increasing labor productivity and shifting growth toward a higher equilibrium level of output. (2) In endogenous growth theories, education increases the economy's capacity to innovate new technologies, products, and processes, thereby promoting growth.
In the environmental field, improving human capital can reduce the use of fossil fuel in the production process. The motive of this research is to understand the effect of public education expenditure shocks on economic growth and environmental quality in Iran.
Methodology
To achieve the goal of the research, a dynamic stochastic general equilibrium (DSGE) model and Bayesian approach have been used. In this regard, observable variables, gross domestic product, private consumption, investment, government expenditure and the gross growth rate of money have been used in the period of 2004 to 2021.
Findings
The results indicate that an increase in public education expenses by one standard deviation increases the marginal efficiency of private education expenses. Because private and public education expenses complement each other and entered the model in the form of a Cobb-Douglas function. Therefore, education hours, investment in education and subsequently, human capital increased. The increase in human capital led to an increase in production, economic growth and a decrease in inflation. The decrease in inflation led to an increase in the real wages of the workforce and finally the desire of the household to increase the supply of labor. Consumption increased in response to an increase in real wages. Also, the behavior of investment is very similar to the behavior of consumption and production, but its changes are more intense than other expenses. Therefore, it can be said that the shock of public education expenses has affected the performance of the economy like an expansionary impulse and has improved the economic conditions. In the environmental sector, with the increase in human capital, economic growth has been improved and this has led to an increase in air pollution and a decrease in environmental quality.
Discussion and Conclusion
In justifying these results, we can point to the weak institutional quality in Iran, that despite the huge amount of human capital investment, there is no necessary effectiveness in the environmental sector, and this is a confirmation that Iran is in the early stages of economic development. As a policy recommendation, in addition to paying attention to education and its role in the development of human capital as a long-term investment, improving the quality of institutions should be considered
The world has suffered severe environmental degradation in the last two decades. The effects of ecological deviations and environmental destruction are alarming and cause concern for stakeholders and environmentalists. These problems have led to environmental disasters such as extreme weather changes and rising sea levels. For this reason, countries are trying to address environmental crises and economic growth at the same time. Basically, it is believed that the destruction of ecosystems in many countries is the result of human actions, including rapid industrialization, population growth, expansion of economic activities, urbanization, and widespread consumption of fossil fuels. Undoubtedly, one of the main factors of climate change and environmental degradation is the emission of carbon dioxide (CO2) caused by economic activities. The relationship between carbon dioxide emissions and economic growth has attracted the attention of researchers and policymakers to reduce carbon dioxide emissions without affecting economic growth. Achieving this goal may be difficult, but studies have included various factors in the growth-carbon dioxide relationship, such as different energy sources, technological innovations, population, financial development, urbanization, and trade openness. In addition to the factors mentioned above, there is a need to assess other relevant factors such as human capital for effective policy development. Despite the extensive role of human capital in promoting energy efficiency and economic growth, by skilled workers in the production process and the preference of educated households to use home appliances with high energy efficiency, few researchers have included this factor in the existing literature. Education is considered as one of the most important human capital investments and plays a vital role in the process of economic growth. Education, at the micro level, affects the future income flow of people, and at the macro level, it is thought that a workforce with better education increases the stock of human capital in the economy. Increased human capital in turn can have positive externalities, such as lower crime or improved health outcomes, which are socially desirable and likely to have positive effects on productivity. In fact, it is the existence of such positive externalities that provides economic justification for governments to support education. It is believed that public spending on education and health will lead to improvement of human capital, reduction of poverty, economic growth and development, and reduction of pollution.
Theoretical studies emphasize different mechanisms through which education affects economic growth. (1) Education increases the human capital of the labor force, thereby increasing labor productivity and shifting growth toward a higher equilibrium level of output. (2) In endogenous growth theories, education increases the economy's capacity to innovate new technologies, products, and processes, thereby promoting growth.
In the environmental field, improving human capital can reduce the use of fossil fuel in the production process. The motive of this research is to understand the effect of public education expenditure shocks on economic growth and environmental quality in Iran.
Methodology
To achieve the goal of the research, a dynamic stochastic general equilibrium (DSGE) model and Bayesian approach have been used. In this regard, observable variables, gross domestic product, private consumption, investment, government expenditure and the gross growth rate of money have been used in the period of 2004 to 2021.
Findings
The results indicate that an increase in public education expenses by one standard deviation increases the marginal efficiency of private education expenses. Because private and public education expenses complement each other and entered the model in the form of a Cobb-Douglas function. Therefore, education hours, investment in education and subsequently, human capital increased. The increase in human capital led to an increase in production, economic growth and a decrease in inflation. The decrease in inflation led to an increase in the real wages of the workforce and finally the desire of the household to increase the supply of labor. Consumption increased in response to an increase in real wages. Also, the behavior of investment is very similar to the behavior of consumption and production, but its changes are more intense than other expenses. Therefore, it can be said that the shock of public education expenses has affected the performance of the economy like an expansionary impulse and has improved the economic conditions. In the environmental sector, with the increase in human capital, economic growth has been improved and this has led to an increase in air pollution and a decrease in environmental quality.
Discussion and Conclusion
In justifying these results, we can point to the weak institutional quality in Iran, that despite the huge amount of human capital investment, there is no necessary effectiveness in the environmental sector, and this is a confirmation that Iran is in the early stages of economic development. As a policy recommendation, in addition to paying attention to education and its role in the development of human capital as a long-term investment, improving the quality of institutions should be considered
Mrs Sara Parang, Dr Zahra Dehghan Shabani, Dr Ebrahim Hadian, Dr Ali Asgary,
Volume 24, Issue 4 (12-2024)
Volume 24, Issue 4 (12-2024)
Abstract
Aim and Introduction
The housing sector is one of the important economic sectors that, in addition to consumer demand, also faces demand from speculators due to its high capital return rate and low risk level. Speculators, motivated by the desire to profit from future price increases, refrain from offering their houses for sale, resulting in a housing vacancy. The presence of vacant houses reduces the housing supply and can lead to the formation of a housing price bubble. Imposing taxes on vacant houses is one of the government's tools to address this issue. The aim of this study is to examine the impact of taxes on vacant houses on the housing price bubble in the city of Shiraz.
Methodology
In this research, an agent-based model is used, considering four active agents in the housing market: sellers, buyers (including sellers and buyers with personal consumption and speculative motivations), developer, and real estate agencies, to investigate the dynamic processes of the housing market. To forecast the housing prices in Shiraz over an eight-year period, statistics and information by the beginning of 2022 have been incorporated into the model, and three different percentages of speculative buyers, including 30%, 50%, and 70% of the total buyers, along with different tax rates of 10%, 15%, 20%, and 25% have been considered.
Findings
The results of the research show that by applying a tax rate of 10%, if 70% of buyers are speculators, the highest growth rate of the housing price bubble was observed; that the decreasing growth rate was equal to 18%, that is, with application of tax on empty houses, the housing price bubble of Shiraz city in 2022 to the end of 2031 decreased by almost 19%, and after that the application of the tax rate of 15% in these conditions was approximately 17% which reduced the housing price bubble. But when the number of regular buyers is more than speculative buyers (30% of buyers are speculative), the application of different tax rates on vacant houses shows the least reduction effect on the housing price bubble. Therefore, when 70% of the buyers in the market are present in the market with the motive of personal consumption, the number of transactions is low. Since ordinary buyers will re-enter the market with a slight probability, and the majority of transactions are made by the 30% of buyers who are speculative, so applying the tax on vacant houses in the first year will cause a number of speculater to leave the market and the number of transactions will be less than before the tax was applied. In fact, mobilisation of the current stock of housing due to the tax may not have been high enough to affect prices which is consistent with Sego (2019).
Furthermore, the results indicate that increasing the tax rate on vacant houses does not necessarily lead to a further reduction of housing price bubble. When more than half of the housing market is in the hands of speculators, their power in transactions would be greater, and the increase in tax rate in the form of an increase in price will intensify the housing price bubble which could mean more transactions between traders. In fact, traders add tax to the price of the property, and increasing tax rates, in return worsens the bubble. So, here selecting the optimal tax rate becomes critically important. When less than half of the housing market is in the hands of speculators, the power of speculators will decrease as a result, which leads to further weakening of the price bubble. However, to a lesser extent when more than half of the market is in the hands of speculators, the price bubble will decrease.
Discussion and Conclusion
The research results indicate that the implementation of different tax rates, despite varying numbers of speculators, can lead to a reduction in the housing price bubble in the city of Shiraz, although the effectiveness may vary under different conditions. Moreover, it can create an appropriate income for the government, which can reduce the class gap by allocating and optimally directing the resulting resources towards the supply of housing for low-income groups. But the government should be careful in choosing the tax rate. It is necessary to set the tax rate on empty houses in such a way that renting the house or offering it in the market is more economical than keeping it empty by traders. In addition to the tax rate, choosing the tax base is also crucial. As mentioned in the text of the research, some countries consider the value of the property as the tax base instead of the rental income, or a fixed annual tax is collected
The housing sector is one of the important economic sectors that, in addition to consumer demand, also faces demand from speculators due to its high capital return rate and low risk level. Speculators, motivated by the desire to profit from future price increases, refrain from offering their houses for sale, resulting in a housing vacancy. The presence of vacant houses reduces the housing supply and can lead to the formation of a housing price bubble. Imposing taxes on vacant houses is one of the government's tools to address this issue. The aim of this study is to examine the impact of taxes on vacant houses on the housing price bubble in the city of Shiraz.
Methodology
In this research, an agent-based model is used, considering four active agents in the housing market: sellers, buyers (including sellers and buyers with personal consumption and speculative motivations), developer, and real estate agencies, to investigate the dynamic processes of the housing market. To forecast the housing prices in Shiraz over an eight-year period, statistics and information by the beginning of 2022 have been incorporated into the model, and three different percentages of speculative buyers, including 30%, 50%, and 70% of the total buyers, along with different tax rates of 10%, 15%, 20%, and 25% have been considered.
Findings
The results of the research show that by applying a tax rate of 10%, if 70% of buyers are speculators, the highest growth rate of the housing price bubble was observed; that the decreasing growth rate was equal to 18%, that is, with application of tax on empty houses, the housing price bubble of Shiraz city in 2022 to the end of 2031 decreased by almost 19%, and after that the application of the tax rate of 15% in these conditions was approximately 17% which reduced the housing price bubble. But when the number of regular buyers is more than speculative buyers (30% of buyers are speculative), the application of different tax rates on vacant houses shows the least reduction effect on the housing price bubble. Therefore, when 70% of the buyers in the market are present in the market with the motive of personal consumption, the number of transactions is low. Since ordinary buyers will re-enter the market with a slight probability, and the majority of transactions are made by the 30% of buyers who are speculative, so applying the tax on vacant houses in the first year will cause a number of speculater to leave the market and the number of transactions will be less than before the tax was applied. In fact, mobilisation of the current stock of housing due to the tax may not have been high enough to affect prices which is consistent with Sego (2019).
Furthermore, the results indicate that increasing the tax rate on vacant houses does not necessarily lead to a further reduction of housing price bubble. When more than half of the housing market is in the hands of speculators, their power in transactions would be greater, and the increase in tax rate in the form of an increase in price will intensify the housing price bubble which could mean more transactions between traders. In fact, traders add tax to the price of the property, and increasing tax rates, in return worsens the bubble. So, here selecting the optimal tax rate becomes critically important. When less than half of the housing market is in the hands of speculators, the power of speculators will decrease as a result, which leads to further weakening of the price bubble. However, to a lesser extent when more than half of the market is in the hands of speculators, the price bubble will decrease.
Discussion and Conclusion
The research results indicate that the implementation of different tax rates, despite varying numbers of speculators, can lead to a reduction in the housing price bubble in the city of Shiraz, although the effectiveness may vary under different conditions. Moreover, it can create an appropriate income for the government, which can reduce the class gap by allocating and optimally directing the resulting resources towards the supply of housing for low-income groups. But the government should be careful in choosing the tax rate. It is necessary to set the tax rate on empty houses in such a way that renting the house or offering it in the market is more economical than keeping it empty by traders. In addition to the tax rate, choosing the tax base is also crucial. As mentioned in the text of the research, some countries consider the value of the property as the tax base instead of the rental income, or a fixed annual tax is collected
Mr Hossein Aghilifar, Dr Khosrow Piraei, Dr Hashem Zare, Dr Mehrzad Ebrahimi,
Volume 25, Issue 1 (3-2025)
Volume 25, Issue 1 (3-2025)
Abstract
Aim and Introduction
A balanced government budget plays a decisive role in the stability of the macroeconomics, and the continuous budget deficit puts the stability of the economy at risk. A budget deficit transpires when the expansion in government expenditures exceeds the growth in government revenue. On the other hand, one of the reasons for the government debt enlargement is the continuous budget deficit. Permanent budget deficit has harmful effects on the economy. Therefore, economists recommend that the government should prevent excessive increase in debt by maintaining a sustainable fiscal policy. Fiscal policy is sustainable when the government reacts to the debt swelling by creating an adequate budget surplus. On the contrary, unsustainable fiscal policy causes crises such as suboptimal allocation of resources, failure in financial markets and high inflation rates. Iran's economy has always been struggling with the permanent budget deficit and high debt stocks. The major motive for this is the dependence of the Iranian government's revenues on the sale of crude oil and its products, because with the decrease in oil revenues, the government resorted to borrowing to compensate for its budget deficit, resulting in debt accretion. Therefore, it is necessary to understand the perspective of fiscal sustainability in Iran. The objective of this research is to assess Iran's government fiscal sustainability and its influential factors by employing annual data of Iran's economy from 1971 to 2022 and by utilizing constant parameter fiscal reaction functions including linear and non-linear models, time-varying parameter fiscal reaction function, Markov-switching fiscal regime change model and fiscal reaction function including control variables.
Methodology
The existing literature about fiscal sustainability in Iran, has mainly examined fiscal sustainability in the framework of constant parameter linear fiscal reaction function. This research assesses different models of fiscal reaction function, such as constant parameter linear and non-linear models, time-varying parameter models and Markov-switching fiscal regime change models regarding Iran's fiscal sustainability. It also evaluates the dominant variables affecting Iran's fiscal sustainability.
Results and Discussion
In this research, firstly, the Iran's government fiscal sustainability is tested through the constant parameter linear and non-linear fiscal reaction functions, and to identify the variables affecting fiscal sustainability, the model including control variables is utilized. Then the Markov-switching fiscal regime change model and the time-varying parameter fiscal reaction function are estimated. Among the constant parameter linear and non-linear models, only the linear model including control variables has a significant debt-to-GDP ratio coefficient, which its sign is negative. Hence, it indicates that the fiscal policy implemented in Iran is unsustainable. The Markov-Switching fiscal regime change model shows the existence of two fiscal regimes, one unsustainable fiscal rgime where the reaction of the primary budget balance to public debt is significant and negative and one sustainable fiscal regime where the reaction of the primary budget balance to public debt is insignificant and positive. Also, the results show that the expected duration of the unsustainable fiscal regime is longer than the expected duration of the sustainable fiscal regime. The results of the time-varying parameter model show that the trend of the smoothed changes of the time-varying parameter is downward during the time, therefore, Iran's fiscal policy has proceeded in an unsustainable direction.
Conclusion
The results of the model including the control variables and the time-varying parameter model and the Markov-switching fiscal regime change model show that Iran's fiscal policy is unsustainable. Also, on the basis of this research findings, the variables of the output gap, the government revenue to GDP ratio and exchange rate fluctuation have a positive impact, and the variables of the government real cyclical expenditure and the old population ratio have a negative impact on the fiscal sustainability in Iran. Based on the results of this research, the government debt reduction has not been the priority of the governments in Iran. This has caused unsustainable fiscal policy which in turn, made the Iranian economy more and more vulnerable with regard to external shocks. While developing revenue sources and reducing dependence on oil revenues, the government should reduce its borrowing and therefore decrease the public debt and take steps towards sustainable fiscal policy to help achieving economic stability and sustainable growth in the long-term
A balanced government budget plays a decisive role in the stability of the macroeconomics, and the continuous budget deficit puts the stability of the economy at risk. A budget deficit transpires when the expansion in government expenditures exceeds the growth in government revenue. On the other hand, one of the reasons for the government debt enlargement is the continuous budget deficit. Permanent budget deficit has harmful effects on the economy. Therefore, economists recommend that the government should prevent excessive increase in debt by maintaining a sustainable fiscal policy. Fiscal policy is sustainable when the government reacts to the debt swelling by creating an adequate budget surplus. On the contrary, unsustainable fiscal policy causes crises such as suboptimal allocation of resources, failure in financial markets and high inflation rates. Iran's economy has always been struggling with the permanent budget deficit and high debt stocks. The major motive for this is the dependence of the Iranian government's revenues on the sale of crude oil and its products, because with the decrease in oil revenues, the government resorted to borrowing to compensate for its budget deficit, resulting in debt accretion. Therefore, it is necessary to understand the perspective of fiscal sustainability in Iran. The objective of this research is to assess Iran's government fiscal sustainability and its influential factors by employing annual data of Iran's economy from 1971 to 2022 and by utilizing constant parameter fiscal reaction functions including linear and non-linear models, time-varying parameter fiscal reaction function, Markov-switching fiscal regime change model and fiscal reaction function including control variables.
Methodology
The existing literature about fiscal sustainability in Iran, has mainly examined fiscal sustainability in the framework of constant parameter linear fiscal reaction function. This research assesses different models of fiscal reaction function, such as constant parameter linear and non-linear models, time-varying parameter models and Markov-switching fiscal regime change models regarding Iran's fiscal sustainability. It also evaluates the dominant variables affecting Iran's fiscal sustainability.
Results and Discussion
In this research, firstly, the Iran's government fiscal sustainability is tested through the constant parameter linear and non-linear fiscal reaction functions, and to identify the variables affecting fiscal sustainability, the model including control variables is utilized. Then the Markov-switching fiscal regime change model and the time-varying parameter fiscal reaction function are estimated. Among the constant parameter linear and non-linear models, only the linear model including control variables has a significant debt-to-GDP ratio coefficient, which its sign is negative. Hence, it indicates that the fiscal policy implemented in Iran is unsustainable. The Markov-Switching fiscal regime change model shows the existence of two fiscal regimes, one unsustainable fiscal rgime where the reaction of the primary budget balance to public debt is significant and negative and one sustainable fiscal regime where the reaction of the primary budget balance to public debt is insignificant and positive. Also, the results show that the expected duration of the unsustainable fiscal regime is longer than the expected duration of the sustainable fiscal regime. The results of the time-varying parameter model show that the trend of the smoothed changes of the time-varying parameter is downward during the time, therefore, Iran's fiscal policy has proceeded in an unsustainable direction.
Conclusion
The results of the model including the control variables and the time-varying parameter model and the Markov-switching fiscal regime change model show that Iran's fiscal policy is unsustainable. Also, on the basis of this research findings, the variables of the output gap, the government revenue to GDP ratio and exchange rate fluctuation have a positive impact, and the variables of the government real cyclical expenditure and the old population ratio have a negative impact on the fiscal sustainability in Iran. Based on the results of this research, the government debt reduction has not been the priority of the governments in Iran. This has caused unsustainable fiscal policy which in turn, made the Iranian economy more and more vulnerable with regard to external shocks. While developing revenue sources and reducing dependence on oil revenues, the government should reduce its borrowing and therefore decrease the public debt and take steps towards sustainable fiscal policy to help achieving economic stability and sustainable growth in the long-term
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