Journal of Economic Modeling Research

---

The characterization of memory effects in crude oil markets is an interesting issue that has attracted the attention of researchers from different disciplines, from econophysics to more classical economics. The importance of the problem relies in the fact that the departure from uncorrelated behavior would imply the presence of not-random effects which, in principle, can be exploited for arbitrage. This paper tries to contribute into the issue by estimating the memory effects by means of different parametric, semi-parametric, and non-parametric methods. In the other words, this paper provides analysis on the memory of the oil markets measured via the fractional integration parameter (d) by estimating it with various methods such as the MLE, NLS, GPH, Whittle, Lo, Hurst Exponent and Wavelet. To achieve this goal, we use the daily time series for WTI and Brent spot crude oil prices as well as 3-month futures, and further divide them into yearly subsections to obtain the historical series of memories. Results of the whittle and wavelet estimations, which are better suitted for this analysis, show no evidence of a long memory process. However, the oil price time series exhibits a nonstationary mean-reverting behaviour. Note that in this paper the behaviour of memory is our concern instead of the memory value itself. The results of memory changes trend shows that memory of international oil markets does not have an important trend change. In the other words, in our study period the efficiency of the market does not have an important decline or increase.

---

The foreign direct investment is one of the economic variables that can positively affect the economic growth, but according to some researches this does not apply to some countries. These researches implicate that this lack of positive effect is due to domestic qualification of the home country. One of the essential qualifications for positive effectiveness of foreign direct investment on the economic growth is the existence of developed financial market. Therefore, in this research we intend to examine the role of financial market in the effectiveness of foreign direct investment on the economic growth. To do this we made use of the data from 57 countries in the period 1990-2005 and the econometric technique of panel data. The results show that in developed countries because of their financial market, the effect of foreign direct investment on economic growth is positive and significant whereas in developing countries this effect is not significant.

---

The main purpose of this paper is to examine the effect of merger, concentration and credit risk on the efficiency of Iranian Banking industry. To measure the efficiency of Iranian banking system, we have used the data of commercial & specialized bank's balance sheets during 2001-2007, and a parametric approach to estimate two empirical models. To estimate efficiency measures and determining main factors affecting the measures, we have used a Logarithmic - Linear form of a random Translog cost function. The results of the first estimated efficiency model show that the average efficiency measure of banking system in Iran is 54% and that the merger of the more inefficient banks within the efficient bank will cause the average efficiency measure rise to 70% The results of the second model - assessing the effecting factors on efficiency- show that the efficiency of banks has an inverse relationship with the concentration (competition in banking industry), and a direct relationship with the IT index (e-banking activity) and the facilities to assets and capital to assets ratios (as the indices of the credit risk).

---

The unequal allocation of economic resources, or other resources of wealth, regarding to the efficiency among the factors of production, is considered as one of the most important condition of optimal resource allocation in the market system. In other words, the market mechanism in the process of allocating resources among the factors of production rewards to the resources with higher returns. So, the article’s main question is whether the unequal distribution of votes similar to the unequal distribution of money, can be applied in the process of the optimal allocation of citizens' benefits in the democracy system? The answer of this question has been given by the monetary model which is similar to the democracy, using the concept of Anthony Downs’s (1957) rational voter hypothesis, the idea of Paul Samuelson's (1958) monetary economic model, the microeconomic theory of consumption and just one of the major components of the market –the unequal distribution of money–. Using the designed model, we can survey several statuses, Such as: vote exchange possibility (similar to the barter economy) and weighting of votes. The article’s results show that the social contract possibility for exchange and the ability to save money causes to change of the shape and nature of the money from public goods to private goods and the interest rate creation. In this situation, one of the important findings of Samuelson model of monetary is appeared in the space of voting theory. One of the contributions of the monetary model of Samuelson is that one of the origins of the monetary interest rate is population growth. The other results show that the weighting of buyers in the monetary model design under conditions can be led to more efficient choices and social welfare increase ultimately. KEYWORDS: Democracy, Market, Political Market, Money, the Weighting of Votes, Downs’s Rational Voter Hypothesis, Samuelson's Monetary Economic Model.

---

The Iranian electricity market is undergoing the first decade of restructuring. Effective competition in wholesale electricity market is a necessary feature of successful electricity industry restructuring. The paper examines the degree of competition in the Iranian electricity market during March to September 2009. The competitive benchmark analysis has been used to simulate producer’s behavior as a price taker firms and compare the competitive market results with actual market outcomes. The competitive benchmark has been calculated through generation costs of producers. Moreover, the possibility of execution market power has been considered by structural index. The finding indicates that the Iranian electricity market has a considerable potential to exercise power market and there were significant departure from competitive behavior during 2009.

---

This paper aims to determine the optimum price of electricity during restructuring process. We maximized social welfare function subject to market equilibrium, maximum production capacity of each group of power plants, maximum demand of each consumer type and the potential of electricity export and import. The model was run using 2007 monthly and annual data by means of GAMS optimization software. The calculated electricity shadow price for the year 2007 was 371.2 per KWh. To get more exact results we run the model for each month separately. The results show that the price of electricity in spring and summer is lower than fall and winter, for marginal cost of power provision in winter rises. This is due to substitution of gas by gasoil and other liquid fuels and also reduction of hydropower production. For both intervals the actual price has a significant deviation from optimum price in Iranian power market.

---

This study investigates predictability, chaos analysis, wavelet decomposition and the performance of neural network models in forecasting the return series of the Tehran Stock Exchange Index (TEDPIX). For this purpose, the daily data from April 24, 2009 to May 3, 2012 is used. Results show that TEDPIX series is chaotic and predictable with nonlinear effect. Also, according to obtained inverse of the largest lyapunov exponent, we are able to predict the future values of the series up to 31 days. Besides, our findings suggest that multi-layer feed forward neural network model and fuzzy model based on decomposed data, are of superior performances in predicting the return series. It is worth mentioning that, among these models, MFNN reveals the best performance.

---

  In recent years, financial economists have increasingly recognized the interaction between market structure and capital structure or financial decisions of the firms.

  This research analyzes the relationship between market structure (power) and the capital structure (leverage ratio) of listed companies in Tehran Stock Exchange (TSE) based on static and dynamic approach. In this research we study a balanced panel dataset of 101 firm-year observations from 2006 to2010 and test significant relationship for testing hypothesis.

  First we use pooled regression to determinant the relationship between capital structure, market structure (Tobin's Q) and five control variables including profitability, size, collateral value of assets, growth rate of assets and uniqueness of assets. After employing chow and hausman test, we selected fixed effect panel data model. Also we employed GMM method to have more efficient result and also to cope with the unobservable firm-specific characteristics and endogeneity problems.

  Our results suggest that the relationship between leverage and market structure is non-linear (cubic) due to the complex interaction of market conditions, agency problems and bankruptcy costs. The study finds a negative relationship between capital structure and profitability and also positive relation between capital structure and the size. So, profitable companies tend to use internal financing such as retained earnings and issuing new shares instead of debt financing. Also big companies prefer to use more leverage due to desirable conditions for getting loans. Our evidence shows that Iranian listed companies are generally more subject to agency cost theory (limited liability effect) and tax shield theory. Finally, the system-GMM results reveal that managers of Iranian firms tend to adjust dynamically their leverage ratios over time.

 

---

Foreign exchange (FX) markets play a significant role in the global financial market, so that it comprises 40% of total global e-commerce values. However, reports show a 90% loss of entire investment of traders in this market usually after six to 12 months after entrance. This paper analyzes losing values of the majority of traders theoretically and empirically. Furthermore, by ignoring spread of broker and existence of inflation, it is shown that the FX market is a repeating zero-sum game. So, by developing a theoretical model in a framework of the Probability Theory, we have shown that probability of a loss in the FX market is quite high. Results show that the loss of the majority of trade occurs undoubtedly. Using two major currency pair data: Euro-Yen (EURJPY) and Euro-Dollar (EURUSD) in a daily duration in 2009 and 2010, we show that probability of failure (loss) cannot be less than 90%. We also showed the fact that, the larger number of transactions, the higher percentage of traders’ losses. The higher probability of loss also depends directly on the volatility of exchange rate and higher rates of spread and leverage.

---

In the current structure of world economy, imports play an important role in the economic development strategy. Although taking the suitable policies for the imports of goods and services is important, but taking the correct strategy is subject to factors affecting imports. In the most of empirical studies, imports are a function of real income and real exchange rate. So, the effect of income inequality on imports of goods and services has less been investigated. Whereas, increase in income inequality causes an increase in the purchasing power of high income people and demand for imported luxury goods and also causes a change in the composition of domestic and imported consuming goods. This study examine the effect of income inequality on import of goods and services in 17 developed countries and 18 developing countries in the period 1990-2010 using generalized method of moment (GMM) analysis. The results indicate that there is a positive relationship between income inequality and imports of goods and services in developed countries while this relation is negative in developing countries. Furthermore, the relationship between GDP and imports of goods and services is positive in both groups of countries, while the relationship between real exchange rate and imports of goods and services is negative in both groups. Thus, policy makers should redistribute income and wealth in favor of the low income people and motivate them to participate in the production sectors, reduce the inequality gap and improve their competitiveness power in the market and enhance the income from the abroad.

---

The structure-conduct-performance (SCP) paradigm has constituted an enduring empirical tradition in empirical industrial economics and has the advantage of clarifying the basic building blocks of the competitive mechanisms. This paper presents a SCP model to estimate causes and effects in Iranian manufacturing industry in 2009. The model used in this paper is a system of four simultaneous equations: agglomeration as the standard measure of structure, advertising and R&D as the standard measure of conduct and profitability as the standard measure of performance. Using the data from a sample of Iranian industries, three-stage least squares results indicate that: a) Advertisement has positive and significant impacts on agglomeration and profitability. b) Profitability has positive and significant impacts on agglomeration and advertisement. c) Agglomeration has positive and significant impact on profitability and also a negative impact on advertisement.

---

From technology, security and physical points of view automobiles are different regarding Hedonic price model, price of a car is a set of implicit prices concerning different characteristics. In this article we estimate the Hedonic price models using 2009 Iranian automobile market data concerning different characteristics for small cars (Engine capacity of 2000cc and less) and large cars (Engine capacity of more than 2000cc): in Iran cars with engine capacity of 2000cc and less benefits from special petrol subsidies while this is not the care for the large cars. The results indicate that characteristics such as antilock brakes (including ABS and EBD), width, airbag, fuel consumption and engine capacity for small cars, variables such as airbag, antilock brakes(including ABS and EBD), and highs for the large cars are important from the points of view of Iranian customers and have significant effects on the car price.

---

The Iranian electricity industry has been restructured following the global experiences. The main objective of restructuring is transition from natural monopoly towards competition in order to improve efficiency. Currently, the Iranian electricity market is performing as imperfect competition and Pay-as-Bid (PAB) auctions are the major trade mechanism in this market. This paper proves that Supply Function Equilibrium (SFE) is an appropriate approach to analyze behavior of the Iranian electricity market. Isfahan electricity market has been considered as a case study in which SFE is applied (regarding marginal cost estimation as well as demand uncertainty). The derived SFE indicates that there is major difference between SFE and Nash equilibrium.

---

The shares of state-owned or public companies are supplied in privatization plan. If the financial market be clear and efficient, it is expected that discovered price of supplied shares be efficient too. However, there is no guarantee for the fulfillment of this condition. Specially, implementation of those policies that, for example, a shock to exchange rate or the price of inputs (such as fuel), can affect market efficiency to discover efficient price of shares. In this study, the factors that cause the deviation of the actual share price have been identified, at first. After that a computable system has been designed by implementation error corrector filters. The input of this system is biased variable and corrected variable is the output. In this study, comparing previous studies, is generalized. So computable designed model can evaluates a wide range of factors. This system has been used to calculate the share of Tehran Regional Electricity Company. The outcomes show that the value of its shares is change from a negative amount (based on bias variables) to 2445 billion Rials (after passing based variable from correction filters). This difference, in addition of information asymmetry, maybe causes, in special in energy and electricity sectors, some opportunities to rent.

---

This article measures the market power in the loan and deposit markets in banking industry of Iran, including 10 state-owned and 4 private banks, during 1380-1389 (2001-2010) based on the evaluating of Lerner indices. To achieving this objective, a stochastic frontier cost function has been applied then market power was calculated. The main results of paper show over the observed period although market power in loan market has reduced, in deposit market it has increased. Outcome of calculations indicates some fluctuations in Lerner indices especially during (2005-10). So, it shows importance of economic policy aimed at removing the barriers of entry to market and regulation of them in order to make these markets more competitive.

---

Establishment of the Gas Exporting Countries Forum in Tehran in 2001 has proved to be one of the most important changes in the gas market. Establishment of the forum has sparked the concern among the consuming countries that a cartel is being formed in the gas market, resulting in the disturbance of supply security and gas price rise. Evidence so suggests the forum is facing fundamental obstacles to form a cartel or any other influential institution. On the other hand, considering the remarkable fall in gas prices during last months, it is necessary to present a model for determining the GECF Members Gas Export Quotas to decrease the gas supply and to increase gas prices. In this paper, we present a model which if it is applied by the GECF members we can expect that gas prices will increase. Hence in this paper first we present two mechanisms for determining the GECF member’s quotas, then considering the current situation of the members in natural gas market the optimal rationing mechanism selected. Besides, for determining the total optimal amount of production in each period as optimal total export of forum two different methods present. The first is more complicated but more accurate.

---

This paper based on the new empirical industrial organization model (NEIO) examines the impact of market concentration and cost efficiency on bank's profit rate margin in Iran. The study uses the model developed by Azzam (1997) to evaluate the market power and cost efficiency for 15 active banks in the banking industry. The empirical findings indicate a decrease in the market power of banks during the period 2001-2011. It is also shown that the conjectural variations index associated with the loans is -0.96, while demand for the loans is completely inelastic where its value is near to 0.087. Additionally, The market power and cost efficiency in the banking industry have been estimated 0.37 and -0.30 respectively meaning a decrease about 0.3 percent for the bank's profit rate due to the efficiency of cost and an increase about 0.07 percent due to the concentration.

---

The main objective of this study was to investigate weak efficient market hypothesis of Tehran stock exchange. For this purpose, total  price index, financial index, industry index and the index's top 50 companies data for the period 2013:7-2009:5 daily basis as well as data on prices and yields for the period 2013:2 - 2000:3 are applied on a monthly basis. In this study, the hypothesis of the poor performance of the Tehran stock exchange, using wavelets and fractional Brownian motion is investigated. The results show the aforementioned hypotheses are rejected.

---

"Market efficiency" is the basic axiom of Financial Economics and fondamental base for ability of optimal allocation (of financial resources) in a capital market. Vast and extensive studies around Market efficiency in recent decades, has induced strong evolutions in economist’s perception from a Market efficiency, methods of assessing and their implications in real world. This essay attempts to procure a concise leterature review of these evolutions. Results show that applied methods in Iran are incomplete in regard with new addvancements in foreign studies. So, weak form efficiency of Tehran Stock Exchange is reevaluated using new method of H statistic of Hinich. Results of empirical study shows that weak form efficiency is rejected for all the sample as a whole. But, market efficiency would be in evolvotion in studied periods based on used H statistic in this article. Also, market efficiency experienced an stationary improvement  from 2005.

---

Extension informal and unorganized money and credit markets in Iran, is much broader than the official money markets. This problem causes a large difference between formal and informal money market loans interest rate in Iran. The large size of the informal market liquidity that can’t be guided by the monetary policies of central bank's and fiscal policies could help to increase the inflation rate in the country.
In this paper, we use the AHP method for to explore this topic that fits with the existing monetary and financial institutions, which sector is more appropriate for investment and targeted liquidity existing in society, in order to reduce inflation and stimulate growth in the industry. The results revealed the stock exchange is the best financial and investments institutions in order to reduce the inflation that caused by the high liquidity of the present.