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In this research , the effect of Iran’s government’s expenditures on private sector’s investment during the period between 1971 to 2005 has been investigated . The results of the Cointegration vectors derived from the johansen method indicates that government investment expenditures have complimentary effects on the private investment expenditures while the government consumption expenditures have competing effects

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Iran plans to export natural gas (NG) to Western Europe using a system of pipelines running through Iran, Turkey, and Western Europe. International gas pricing is usually undertaken through negotiations between buyers and sellers on a bilateral basis. Currently, Russia is the only exporter of gas from the Former Soviet region. So, Russia competes strongly with Iran to export NG to Western Europe. This paper develops a bargaining model to study natural gas pricing and analyze competition between Iran and Russia as gas suppliers to Western Europe. In this model, it is assumed that NG pricing is usually linked to the prices of alternative fuels as competing energy sources. Therefore, in light of previous evidence, it is reasonable to consider that there is a long-run relationship between NG price and price of alternative fuels. Initially, a regression model is specified to investigate unlagged relationship among variables. This relationship is estimated using the Johansen cointegration technique and then we forecast margins of the Iranian NG price. Finally, a VECM model is identified and used to forecast the lower and upper bounds of future NG price.

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In this paper a macroeconomic approach is derived to develop a long run electricity demand model to analyze the main factors affecting electricity demand in the Islamic Republic of Iran. According to the definition of a demand function, electricity demand, in general, is determined by some main factors including gross domestic product (GDP), prices, etc. This paper, by analyzing the specific political and economical conditions in the Iran, introduces electricity intensity and a dummy variable WAR into the electricity demand forecasting model. A binary dummy variable, WAR is applied to correct the model (between the years 1980-1988 during the Iran and Iraq war). In this study, two popular econometric techniques namely unit root test and cointegration model is derived for modeling the electricity demand. Cointegration is established between kWh and, respectively, GDP, electricity price, electricity intensity, and WAR as a dummy variable. The results show that although GDP is still the most important factor for electricity demand, electricity demand is negatively related to efficiency improvement and tariffs in Iran.

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This paper investigates the determinants of private investment in Iran over the period of 1382-2004. First, the variables are tested for unit root and then the long run private investment equation is estimated using cointegration technique. The variables considered in the model include GDP, government investment, inflation, infrastructure and institutions such as rules and regulations, property rights, corruption and social Securities. The results indicate that GDP and infrastructure positively affect private investment while the institution factors such as rules and regulations, property rights, social securities and corruptions negatively affect private investment.

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Understanding the different aspects of the relationship between energy consumption and economic growth can outstandingly help to adopt appropriate policies in energy sector. Structural breaks and regime shifts may affect the above relationship. Therefore, it is important to consider structural breaks and regime shifts in empirical analysis. In this paper, the relationship between energy consumption and economic growth is analyzed in the presence of structural breaks. The empirical models are specified and estimated using Iran's time series data during 1967- 2005 period. To this end, unit root tests proposed by Zivot and Andrews (1992) are first used to identify structural breaks found endogenously and then the Gregory-Hansen cointegration test, which allows strctural breaks in time series, is employed to estimate the long-run relationship between energy consumption and economic growth. The results show that in the long run, there is a positive and significant relationship between energy consumption and economic growth in Iran.

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There are many factors affecting economic growth. Based on the literature, the effects of these factors such as higher education are mainly examined using endogenous economic growth theories. Various theoretical models are used to estimate the relation among variables affecting economic growth. This paper investigates the effects of higher education human capital on the economic growth in Iran using the endogenous growth models. The specified model includes human capital, physical investment and foreign debt which are identified as the main determinants of economic growth in Iran. Two dummy variables are included in the model in order to represent the effects of Islamic revolution and imposed war. The Johnson five steps approach is employed to estimate the empirical model. The results confirm that higher education human capital has a relatively large and statistically significant effect on the economic growth in Iran. It is found that the growth elasticity of higher education human capital is larger than the growth impact of physical capital investment. So, in order to obtain a high rate of economic growth in the country, investment in higher education human capital must be increased. Moreover, based on the findings, it is recommended that the investment should be made using domestic saving instead of financing abroad.

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There have been few studies working on effects of financial repression policies on Iran’s economic growth. Considering the huge share of agricultural sector, we have been trying to fill this gap by the help of time series data from 1962 to 2007 on agricultural GDP, unproductive government expenditure, human capital, industrial price index, political instability, and financial repression measures. Results show that controlling the bank reserve requirement ratio as a proxy for financial repression has negative effect on economic growth of agricultural sector. This indicates that reducing controls on this parameter will help government to achieve higher rate of growth.

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One of the most controversial and relatively old subjects in economics is the optimal size of government and its impact on macroeconomic variables. Government size and extent of public enterprises are of crucial impacts on economy. Thus, one of the main objectives of the governments is to achieve full employment. This paper investigates the effects of government size on unemployment rate in Iran’s economy using annual data during 1959-2011. It applies Pesaran, Shin and Smith (PSS) bounds testing approach to estimate an Unrestricted Error Correction Model (UECM), which derives both dynamic and long-term relationships. The finding of the research shows that the government size has a significant positive effect on unemployment rate, indicating that reducing the size of government would lead to reduction of unemployment rate in Iran. With increases in size of government, the crowding out effect in the form of private investment is decreased. As a result, productivity growth and international competition are reduced, then the unemployment rate is increased. The estimation of the ECM model shows that the error term is negative and statistically significant. The Error Correction Term (ECT) is relatively low (-0.27) indicating a slow adjustment toward the equilibrium.

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Understanding the nature of the causal relationship among economic variables is crucial for the economic policy-makers and planners. So, this study investigates Granger causality between producer price index (PPI) and consumer price index (CPI) for the economy of Iran. From a policy-making point of view, the findings of the study may inform economic policy-makers in pursuing effective anti-inflationary policies. To this end, monthly data are used over the period 1990- 2011. The results of the cointegration test indicate that there is a long-run equilibrium relationship between these variables. According to Hsiao test, there is bi-directional causality between consumer price index (CPI) and producer price index (PPI) in both short-run and long-run. Toda and Yamamoto test also indicate the bi-directional causal relationship between the variables. However, it seems that causality from PPI to CPI is stronger than that from CPI to PPI, supporting the Cushing and McGarvey (1990) hypothesis.

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The government of Iran has faced with budget deficits during 1979 – 2010, which has been financed mainly through money creation. Theoretically, the impacts of budget deficit and inflationary tax on macroeconomy are very controversial, so that both decrease and increase in consumption, investment, net exports and total expenditure have been supported by empirical researches. Using structural cointegrating vector autoregressive, this paper investigates the impacts of inflationary finance on the demand side of Iran’s economy during mentioned period. Budget deficit is defined as the difference between operating budget deficit (minus net operating balance) and capital balance surplus, or net lending (net acquisition of nonfinancial assets). The results show that both operating budget deficit and net lending have positive impacts on consumption, investment and net imports in the short run. So changes in the demand side have not necessarily same orientation with increase or decrease in budget deficits, but the source of change in budget deficit determines its effects. Reducing budget deficits through positive shock to net lending and a policy of increasing operating budget deficit have similar effects. Furthermore, the results show that the operating budget deficit has no effect on demand components in the long run. The complementarity of inflationary tax and financial repression is confirmed in both short run and long run. In addition, the results indicate that an increase in operating budget deficit and/or net lending induce more inflationary tax and financial repression. Although the budget deficit has no effect on demand side in the long run, but its two outcomes -inflationary tax and financial repression- have opposite effects on the consumption, investment and net imports in both short run and long run.
 

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