University of TehranIranian Economic Review1026-654228320240901Inflationary Effects of the Foreign Currency Shocks with Different Sources: The Response of Monetary Policy in a Developing Economy6957299921510.22059/ier.2024.334485.1007328ENAbdorasoulSadeghiDepartment of Economics, Shiraz University, Shiraz, Iran0000-0002-3914-0591HusseinMarzbanDepartment of Economics, Shiraz University, Shiraz, IranAli HusseinSamadiDepartment of Economics, Shiraz University, Shiraz, IranKarimAzarbaiejaniFaculty of Administrative Sciences and Economics, University of Isfahan, Isfahan, IranParvizRostamzadehDepartment of Economics, Shiraz University, Shiraz, IranJournal Article20220502The inflation rate has constantly been volatile in Iran’s economy. At the same time, the considerable fluctuations in the foreign exchange market, the inflationary environment and its impact on inflation expectations, the role of the central bank, and whether or not expectations are consistent with monetary policy indicate a likely correlation between these variables. Therefore, this study aims to investigate separately for different real sectors of an economy during the periods 2001:1-2010:4 and 2011:1-2018:4 whether Iran’s economy was exposed to foreign currency shocks with domestic and external sources. Moreover, the responses of monetary policy to these shocks were examined using the vector autoregressive method (VAR). The results showed that the price index of all commodity groups increased in response to foreign exchange shocks, regardless of domestic or external sources. The inflationary effects of foreign currency shocks with domestic sources persisted in the medium and long term, while the inflationary effects of foreign exchange shocks with external sources were moderate in the medium term and neutralized in the long term. In addition, the speed of corrections in the deviation from a long-term equilibrium has significantly been greater after the shock of international economic sanctions than the policy of exchange rate unification. Monetary policy was expansionary and strengthened after the occurrence of the domestic-source foreign shock, and inflation expectations did not move in the same direction. On the other hand, monetary policy was contractionary and moderated the inflationary impact of the foreign currency shock, and inflation expectations went in the same direction.https://ier.ut.ac.ir/article_99215_7e9ab91213669815c2800039074b4313.pdfUniversity of TehranIranian Economic Review1026-654228320240901The Predictability of Value Premiums in the Tehran Stock Exchange: Evidence Based on the Prior Returns of Value and Glamour Stocks7307539921610.22059/ier.2024.343527.1007461ENSaeedSamadiFaculty of Administrative Science and Economics, University of Isfahan, IranEhsanMohamadzadeFaculty of Administrative Science and Economics, University of Isfahan, IranNematolahAkbariFaculty of Administrative Science and Economics, University of Isfahan, IranMahmoudBotshekanDepartment of Management, University of Isfahan, Isfahan, IranJournal Article20220612This paper investigates whether the prior returns of value and glamour stocks can predict future value premiums using stocks listed on the Tehran Stock Exchange. In the spirit of Eleswarapu and Reinganum (2004), we focus on the exclusive predictive power of prior returns of style portfolios. We form three sets of value and glamour portfolios based on three different definitions. While we find that value premiums are predictable in both in-sample and out-of-sample tests, this evidence is not the same when using prior returns for each style. Glamour stock returns positively predict future value premiums while value stock returns predict them with a negative coefficient. Thus, we show that the prior underperformance of current value stocks can be a good candidate for predicting value premiums. We also show that this evidence of predictability can be exploited in the form of a style rotation strategy and can beat the buy-and-hold strategy as well as the usual value investing strategies.https://ier.ut.ac.ir/article_99216_a165aedc18dca111bdfb364fd45fefea.pdfUniversity of TehranIranian Economic Review1026-654228320240901The Impact of Economic Determinants on Terrorism in Iraq during the Period 2000-20207547879921710.22059/ier.2024.346296.1007505ENSarah Ahmed HassanChawsheenFaculty of Economics, Salahaddin University, Erbil, IraqZaki HusseinQaderFaculty of Economics, Salahaddin University, Erbil, IraqJournal Article20220731There are many economic, social, and political determinants impact a country's degree of terrorism. In this study, we attempt to reveal the influence of the most major macroeconomic determinants on the consequences of terrorist actions in Iraq, which measured by the Terrorism Index (TI), during the years 2000 - 2020. This was done using descriptive statistics and econometric methodologies such as Auto Regressive Distributed Lags (ARDL), Error Correction Model (ECM), Variance Decomposition (VD), and VAR Impulse Response (VAR). According to the findings, the inflation rate has a long-term positive association with terrorism in Iraq, but GDP growth, unemployment, income inequality, and political stability all have a negative link with terrorism, ceteris paribus. Regarding the short-term determinants, the inflation rate has a positive relationship with TI, whereas the GINI coefficient has a negative impact on TI. The rate of adjustment from the previous year's TI disequilibrium to the current year's equilibrium is 81.9%.https://ier.ut.ac.ir/article_99217_486dd2b57e57a123bbe9eb60782c6d86.pdfUniversity of TehranIranian Economic Review1026-654228320240901Economic Complexity and Shadow Economy in Africa7888139924310.22059/ier.2024.346815.1007510ENFolorunsho MonsuruAjideDepartment of Economics, University of Ilorin, Ilorin, NigeriaJames TemitopeDadaDepartment of Economics, Obafemi Awolowo University, Ile-Ife, Nigeria0000-0002-8434-6660Journal Article20220805In line with the nascent literature on economic complexity, this paper answers whether economic complexity impacts the size of the shadow economy in African economies, a region confronted with a large amount of informal economic operations. We apply four classes of mean group estimators (mean group, augmented mean group, common correlated effects mean group, and dynamic common correlated effects mean group) on African panel data of 27 economies from 1995 to 2017. There is no significant evidence to justify that economic complexity affects the size of the shadow economy in the mean group. However, in the group-specific coefficients, the relationship is significantly negative for the Republic of Congo, Ghana, and Uganda, while the opposite result is confirmed for Botswana, Madagascar, and Tunisia. The study concludes that the impact of economic complexity is heterogeneous in the case of African economies. The policy implications of the results are discussed.https://ier.ut.ac.ir/article_99243_0bac04d5e2e566a8d0b4d9c5058ea3a5.pdfUniversity of TehranIranian Economic Review1026-654228320240901Does Islamic Finance Development Support Economic Growth? (A New Overlook)8158409924410.22059/ier.2024.347404.1007519ENAbdulkadir SezaiEmecDepartment of Banking and Insurance, Vocational School, Tarsus University, Mersin, TurkeyFatihKaplanDepartment of International Trade and Logistics, Tarsus University, Mersin, TurkeyOmerYalcinkayaDepartment of Economics, Ataturk University, Erzurum, TurkeyJournal Article20220829In the study, the relationship between the development of Islamic finance and economic growth in 40 countries where the share of the value of Islamic finance assets in total financial assets is determined to be the highest in the world is examined. Econometric models, which are defined based on the extension of the Cobb-Douglas production function, are analyzed from 2012 to 2018 within the scope of panel data methodology that takes into account cross-section dependence. According to the results of the analysis made on two different models in which the total market value of Islamic finance assets is measured as flow and stock variables: Islamic finance development affects economic growth in a positive and statistically significant way in the 40 countries that make up the sample. This result reveals that there may be practices for the development of Islamic financial markets among the policies that countries can follow to achieve stable and sustainable economic growth.https://ier.ut.ac.ir/article_99244_0f412efdbc00127c47319d1216601c69.pdfUniversity of TehranIranian Economic Review1026-654228320240901Contractual Justice and the Index of Bargaining Power of Tenants in the Iranian Housing Sector-8158409924510.22059/ier.2024.347776.1007520ENFathollahTariFaculty of Economics, Allameh Tabataba’i University, Tehran, Iran0000-0002-6867-2968Mohamad MehdiMojahedi MoakharFaculty of Economics, Allameh Tabataba’i University, Tehran, IranAminZahedmehrFaculty of Economics, Allameh Tabataba’i University, Tehran, IranJournal Article20220827Contract theory is the study of how contracts develop among economic agents. The imbalance in the bargaining power of the contract parties causes a crisis in the market, particularly in the housing sector. Countries often adopt specific laws to support tenants and increase their bargaining power, thus improving the indexes measuring contractual justice. Islam also offers mechanisms that can prevent possible unfair consequences in contractual relationships. The present study used the method of analytic hierarchy process (AHP) to evaluate the mechanisms permitted by Islam to increase the bargaining power of tenants. The bargaining power index was calculated in three cases, before and after the COVID-19 pandemic and in the case of introducing new conditions based on Islamic rules. The results showed that the application of such mechanisms could considerably improve the index of bargaining power of tenants by increasing it from 0.407 to 0.981. The figure, which even exceeds the global average of 0.751, is considered a significant improvement in line with Islamic regulations.https://ier.ut.ac.ir/article_99245_b711a262999fb3e75ce53e511b0b7fd1.pdfUniversity of TehranIranian Economic Review1026-654228320240901A New Contributory Pension Model – Evidence from Chile8588839924610.22059/ier.2024.348212.1007529ENOctavioMartinezDepartment of Economics, Universidad Autónoma de Chile, Talca, ChileRanjeevaRanjanDepartment of Educational Foundations, Universidad Católica del Maule, Talca, ChileKumar SudheerRajDepartment of Actuarial Sciences, Institute of Insurance and Risk Management, Hyderabad, IndiaJournal Article20220922We develop a model of individual account (IA) pension systems that considers the wage distribution of the economy and models the density of contributions or so-called “Lagunas” (gaps) as a function of wage inequality. People with lower wages are forced to work in the informal market where they do not contribute to their individual pension accounts. This model allows us to find the entire distribution of pensions; with the possibility to evaluate the effects of policies on average pensions as well as changes in distribution. We applied the model to the Chilean pension system and found that for workers who have contributed less than 18 years an increase in contribution rates has a greater effect than an increase in the interest rate. The people most affected by labor informality benefit more from a marginal increase in the contribution rate than from a marginal increase in the interest rate. Along the same lines, we find that the marginal effect of increasing the contribution rate is greater than the marginal effect of increasing the retirement age. From our study, we find a recommendable policy due to its positive effects in increasing the level of pensions as well as reducing the level of inequality in the contribution rate in the account of each individual at the time of birth.https://ier.ut.ac.ir/article_99246_88e498e77667c6424c6b4febe47d85cf.pdfUniversity of TehranIranian Economic Review1026-654228320240901The Affectability of Iran's Tourism Industry from the New VAT Law8848979924710.22059/ier.2024.348594.1007537ENJavadBaratiDepartment of Tourism Economics, Tourism Research Institute; Academic Center for Education, Culture and Research (ACECR), Tehran, IranMaryamRasoulzadehDepartment of Tourism Economics, Tourism Research Institute; Academic Center for Education, Culture and Research (ACECR), Tehran, IranJournal Article20220921The VAT law amendment in Iran, enforced since the beginning of 2022, includes three key changes in the VAT of the tourism industry: 1- tax exemptions in the transport sector (except for domestic air transport), 2- tax exemption in the accommodation sector (except for 4- and 5-star hotels), and 3- tax exemption in other tourism services, including travel agencies and attractions (except for domestic travel agencies). According to this law, and due to the price change in the rate of providing tourism services in Iran, the cost that tourists pay to receive tourism services will also change. The present study seeks to answer how much this price change will change the final price of the product (or service). For this purpose, it uses the national input-output model. The input-output table for 2019, prepared in the conditions of economic stability and the absence of COVID-19 and its negative effects on tourism, has been updated. The results suggest that tax exemptions in the tourism sector will not significantly affect the whole economy and even the tourism industry. However, tax exemptions on the services of travel agencies can be felt in this sector. Given the current very competitive price of Iran's tourism industry compared to other countries, it can be stated that these exemptions will not have a significant effect on the growth of foreign tourism in the country and domestic tourism will be affected slightly.https://ier.ut.ac.ir/article_99247_9a38dcd6b120f7e59297665c3ac656a1.pdfUniversity of TehranIranian Economic Review1026-654228320240901Evaluating the Effects of the Monetary Policy on the Total Stock Market Index in the Iranian Economy: Using the TVP-VAR and GARCH Approaches8999209924910.22059/ier.2024.348701.1007539ENZhaleZareiMonetary and Banking Research Institute, Tehran, IranMaryamHemmatiStrategic Studies Institute, Tehran, IranPedramDavoudiStrategic Studies Institute, Tehran, IranJournal Article20220920This study aims to evaluate the effects of the monetary policy on the total stock market index using Guangton et al. (2021)’s nonlinear approach. Contrary to other research on Iran’s economy that has focused more on long- and short-term relations assuming a fixed parameter approach, this study uses the TVP-VAR (time-varying parameter) and GARCH (generalized autoregressive conditional heteroscedasticity) approaches to examine the effectiveness of monetary policy on the stock market index through the exchange rate, liquidity, and interbank market interest rate channels during 2009:5-2021:10 with a monthly frequency. Results showed that throughout the period under study, changes in monetary policy as expressed in interbank interest and exchange rates did not have the same influence on the total stock market index. While these impacts have been sometimes positive and sometimes negative, those of the liquidity growth rate on the specified index have consistently been positive and significant. The stock market is greatly impacted by changes in interbank interest, exchange, and liquidity rates, therefore monetary policymakers must consider financial stability while regulating these policy variables.https://ier.ut.ac.ir/article_99249_b6d6da733b92cf4cae2bc775f569db64.pdfUniversity of TehranIranian Economic Review1026-654228320240901Boomerang Effect of Remittances: Cross-Country Evidence9219459925010.22059/ier.2024.349529.1007553ENEmeka OkoroAkpaDepartment of Economics, Olabisi Onabanjo University, P.M.B 2002, Ago-Iwoye, Ogun State, Nigeria; Babcock University Centre for Open Distance and e-Learning (BUCODeL), Ilishan Remo, Ogun State, NigeriaSegun SubairAwodeDepartment of Economic and Business Policy, Nigerian Institute of Social and Economic Research (NISER), Ibadan, Nigeria; Department of Economics, Olabisi Onabanjo University, P.M.B 2002, Ago-Iwoye, Ogun State, NigeriaJournal Article20221005We test the boomerang effect in remittances (the effect of remittances on imports) for the top two global remittances recipients – China and India – and the top two recipients in Africa – Egypt, and Nigeria – from 1981 to 2019. The first two countries have more domestically developed productive capacities than the last two countries, making them (China and India) potentially able to shrug off a remittance boomerang than Egypt and Nigeria. We find asymmetry in the relationship between remittances and imports in Nigeria using the nonlinear autoregressive distributed lag (NARDL) model of Shin et al. (2014). We mostly find positive asymmetric effects in the short- and long-run, thus confirming the boomerang effect in Nigeria. For Egypt, we find a short-run, OLS asymmetric positive effect of remittances on imports, confirming the boomerang effect. The short-run OLS symmetric effect of remittances on imports in China and India is negative, refuting the boomerang effect in both countries. To reduce the boomerang effect in Nigeria and Egypt, efforts must be made to improve and expand the productive capacity of the domestic economy so that most of the inward remittances will be spent on commodities produced in the domestic economy, and reduce imports.https://ier.ut.ac.ir/article_99250_0dc1e02659bdac827a8f70ee5fa2b85d.pdfUniversity of TehranIranian Economic Review1026-654228320240901Estimating the Trend in Health Time Preference Rate (A Case Study of High-Income Countries)9469749925110.22059/ier.2024.343547.1007462ENRaziyehMohammadi SaberDepartment of Economic Development and Planning, Faculty of Management and Economics, Tarbiat Modares University, Tehran, IranAbbasAssari AraniDepartment of Economic Development and Planning, Faculty of Management and Economics, Tarbiat Modares University, Tehran, IranAmir H.MozayaniEconomic Research Institute, Tarbiat Modares University, Tehran, IranLotfaliAgheliEconomic Research Institute, Tarbiat Modares University, Tehran, IranJournal Article20220614People’s behavior is related to their time horizon. As people’s time preference rate increases, planning becomes increasingly myopic. This study employs the MIMIC model to evaluate the shifts in the health-related time preference rate in several developed countries (France, Sweden, Netherlands, Switzerland, United States, Australia, Germany, Canada, Norway, and United Kingdom) between 2000 and 2019. The results show that the time preference rate for health has different trends, regarding the slope and intercept of the changes. These differences show the different effects of the policies implemented in the field of health on people’s attitudes toward healthier living in the future. In France, the trend in time preference rates for health is downward with a small slope, in Sweden, and the US, whereas it is downward with a large slope in the Netherlands and Switzerland. Due to the severity of the changes in the slope of time preference rates for health, people in the Netherlands and Switzerland are more concerned about and invested in improving their health. The time preference rate for health has an upward trend in Australia, Germany, and Canada, and its slope is higher in Germany and Australia. Therefore, people prefer the interests of the present to the future in these three countries. In Norway and the UK, this trend has a constant slope, implying that people's attitudes have insignificantly changed toward health-related behaviors.https://ier.ut.ac.ir/article_99251_1b32be3aab92f0b249a95ba6fc848504.pdfUniversity of TehranIranian Economic Review1026-654228320240901Financial Development, Trade Openness, and Economic Growth in Tunisia9759909925210.22059/ier.2024.349122.1007548ENMhamedKhemakhemDepartment of Economics Higher Institute of Business Administration, Sfax University, Sfax, TunisiaSamirSaidiDepartment of Economics, Faculty of Economics and Management, Sfax University, Sfax, Tunisia; Department of Economics, Faculty of Law, Economics and Management, Jendouba University, Jendouba8189, TunisiaJournal Article20221016The finance trade nexus reveals the importance of finance for trading and economic growth. This study used both Johansen Co-integration and Granger causality approaches to investigate the presence of the linkages among financial development (FD), trade openness (TO), and economic growth (GDP) and the causalities between the variables (in Tunisia over the period 1980-2020). According to the co-integration test results, there is a long-run stable relationship between domestic credit to the private sector, aggregate exports and imports of goods and services, and GDP. The findings indicate that domestic credit to the private sector has the strongest effect on economic growth compared to the sum of exports and imports of goods and services in Tunisia. In addition, the direction of causality followed mixed. Thereby, FD and TO can be deployed to boost growth: The Tunisian government should try to contribute to the financial development to construct a durable financial system and to trigger the Gross Domestic Product. Furthermore, for the Tunisian economies to obtain benefits from trade liberalization, policies and institutional reforms toward investment, production efficiency, and financial development should be carried out abreast with the liberalization.https://ier.ut.ac.ir/article_99252_7c230ad89e98aa82819dd55375460baa.pdfUniversity of TehranIranian Economic Review1026-654228320240901Bilateral Real Exchange Rate Volatility and Trade: The Nigerian Case99110219925310.22059/ier.2024.349723.1007557ENEbenezer A.OlubiyiDepartment of Economics, Federal University of Agriculture, Abeokuta, NigeriaMariamDaudaDepartment of Economics, Federal University of Agriculture, Abeokuta, NigeriaJournal Article20221019Real exchange rate volatility can inhibit or enhance trade. The volatility of Nigerian currency concerning Yuan, Yen, Pounds, and the US dollar exists but is not homogenous. This situation will affect trade flows between Nigeria and China, Japan, the UK, and the US. Therefore, this study unravels the nature and possible result of real exchange rate volatility on trade at the bilateral level from 2008:M1 to 2019:M3. Results obtained from the ARDL model in the context of risk aversion theory are as follows: (1) In the short run, real exchange rate volatility differs across country partners but more persistent in the case of Nigeria-UK trade; (2) in the long run, naira-dollar exchange rate shows detrimental effect on exports to the US, albeit insignificant; (3) real exchange rate volatility is trade enhancing with Japan, inhibiting with the UK and indifference with China and US. Following these results, issues surrounding real exchange rate volatility and trade must be better studied at the bilateral level to provide easy and implementable policy recommendations. Going by the results, it is recommended that trade with Japan should be strengthened. The monetary authorities should also consider Yen and Yuan as part of foreign currencies for international transactions. More hedging instruments should be encouraged to absorb volatility, particularly in the case of Nigeria-UK trade. The potential traders will possibly do well by looking inward instead of facing exchange rate risk in the UK.https://ier.ut.ac.ir/article_99253_ee83b52fd1bb09eef3eeb7b8420e603a.pdfUniversity of TehranIranian Economic Review1026-654228320240901Financial Distress Prediction Using Artificial Neural Network, Partial Least Squares Regression, Support Vector Machine Hybrid Model, and Logit Model102210499925510.22059/ier.2024.350546.1007572ENMohammadOsoolianDepartment of Financial Management and Insurance, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, IranVidaVarahramiFaculty of Economics and Political Science, Shahid Beheshti University, Tehran, IranHodaRazaviDepartment of Financial Management and Insurance, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, IranJournal Article20221202Financial distress refers to the situation where a firm’s cash flows are insufficient to meet contractually required payments. This has caused concern among capital owners and compelled financial analysts to employ a variety of methods to assess companies’ equity and analyze the firm’s financial status. Assessing and predicting financial distress in a timely and accurate manner can aid decision-makers in finding the optimal solution and preventing it. Numerous models have been developed thus far to predict and evaluate financial distress. The prediction accuracy has been improved through the use of various innovative methods. Using financial ratios and market data as independent variables and obtaining patterns for the financial forecast is one of the most important methods for evaluating the financial stability of businesses. Therefore, the primary objective of this study is to evaluate the performance of five models in this field, compare their accuracy of prediction, and ultimately select the best model to predict financial distress for a specified period in Iran. Specifically, the logit model, artificial neural network (ANN), support vector machine (SVM), partial least squares regression (PLS), and a hybrid model of SVM and PLS were chosen, analyzed, and compared. The results of the average accuracy of prediction indicate that the SVM has the highest accuracy one year before the onset of financial distress. In addition, findings from the two years preceding the failure indicate that the SVM-PLS model provides the most accurate classification of financially distressed and non-distressed firms.https://ier.ut.ac.ir/article_99255_b9b5207819533ae1eb260e917ed89cb8.pdfUniversity of TehranIranian Economic Review1026-654228320240901Does Credit Risk across Different Sizes of Banking Industry Matter for the Stability of Banks in Iran: A Panel Threshold Regression Approach105010859925610.22059/ier.2024.350316.1007568ENDavoudMahmoudiniaFaculty of Economics and Administrative Sciences, Vali-e-Asr University of Rafsanjan, Rafsanjan, IranJournal Article20221107This paper explores the association between credit risk and different types of bank stability based on Z-score across various bank size regimes by employing a panel threshold regression and an extensive dataset of 20 banking industries in Iran’s economy over the 2005–2020 period, although the choice of the starting and ending dates was based on the availability of data. The core finding is that in many cases, under all three measures of bank stability, credit risk at different threshold levels of bank scales has a positive impact on the z-score for all banks. In addition, we observed that the coefficients of other control variables including bank size, rate of return, liquidity risk, and funding risk on banking stability were based on our expectations. Moreover, the results revealed that the correlation between credit risk and bank stability was not homogenous, depending on whether the bank was state or private. Besides these, we found that for the state banking system in Iran, a concentration-stability view<em> </em>could be proved in the sense that larger banks may enhance profits. Based on the empirical evidence obtained, the findings offer some important implications for Iran’s policymakers.https://ier.ut.ac.ir/article_99256_784f700ba4b4e7c52523cda359286dbb.pdf