General Equilibrium Resource Elasticity in an Open Resource-Abundant Economy

This study investigates the sensitivity of macro and sectoral variables to natural resource revenues in a resource-abundant developing country. Here, different transmission mechanisms are in effect. The paper considers the exchange rate channel, financial sector channel, capital flow channel, public sector channel, and resource reallocation channel. I employ a large scale real-financial general equilibrium model with especial focus on fossil fuel energy, natural resources, financial sector interactions, inter-sectoral linkages, and public sector responses. The model is used to predict the likely changes in oil and gas exports in Iran. It causes more oil exports but at lower international prices. Our comparative static analysis indicates that resource elasticity for GDP is from +0.10 to +0.13; for public services is from +0.16 to +0.27; for import is from +0.42 to +0.45; for mineral extraction is from -0.50 to -0.10, and for the manufacturing sector is from -0.08 to -0.06. The simulation reveals extraction competition among natural resources

General Equilibrium Resource Elasticity in an Open Resource-Abundant Economy

This study investigates the sensitivity of macro and sectoral variables to natural resource revenues in a resource-abundant developing country. Here, different transmission mechanisms are in effect. The paper considers the exchange rate channel, financial sector channel, capital flow channel, public sector channel, and resource reallocation channel. I employ a large scale real-financial general equilibrium model with especial focus on fossil fuel energy, natural resources, financial sector interactions, inter-sectoral linkages, and public sector responses. The model is used to predict the likely changes in oil and gas exports in Iran. It causes more oil exports but at lower international prices. Our comparative static analysis indicates that resource elasticity for GDP is from +0.10 to +0.13; for public services is from +0.16 to +0.27; for import is from +0.42 to +0.45; for mineral extraction is from -0.50 to -0.10, and for the manufacturing sector is from -0.08 to -0.06. The simulation reveals extraction competition among natural resources

Modeling Dutch Disease in the Economy of Iran: A Computable General Equilibrium Approach

In this paper, we will study the impacts of a counterfactual scenario of an increase in oil revenues on the price levels, activity levels, imports and exports in Iran. Our focus is on non-traded sectors, household welfare, and expenditure indices in the framework of a Computable General Equilibrium (CGE) model. The model is calibrated based on the 2001 Micro Consistent Matrix assuming Iran as a small open economy. The model consists of 11 production sectors, urban households, rural households, government, capital formation, exports, and imports. We concentrate on non-traded products especially rental services, public services, and construction sectors. Since part of the outputs of the construction sector relates to the capital value of buildings, we divided the demand for the construction sector into consumption and investment (seeking capital gain) purposes. In this study, we simulate the impact of a 30% increase in annual oil revenues. Based on the results, this shock leads to an increase in activity levels in the nontraded sectors and a decline in the traded sectors activity levels. Services and manufacturing show the highest increases in import levels at respectively 24% and 22%. Except for the oil and gas sector, all productive sectors experience declining exports. Public services, water, and construction sectors register the highest price increases. Results are robust to production elasticity of substitution choice, while they are sensitive to the elasticity of substitution between imports and domestic output

A Survey on Lead-Lag Effect on Small and Large Size Portfolios in Tehran Stock Exchange

In inefficient markets, returns are not distributed normally and they have serial correlations. It is obvious that the price changes are not independent, so there is a pattern in price changes which help investors to gain unusual benefits. One of the patterns which are concerned with an inefficient market is the lead-lag effect. This research investigates the existence of this effect between small and large size portfolios in Tehran Stock Exchange during the period of 2011-2017. This relationship was examined both in short-run by using cross-correlation approach and vector auto-regressive model and long-run by employing cointegration methodology. Cross-correlation matrices imply that there is a lead-lag effect in short-run. Existence profiles and variance decomposition are used for further validation, the results show that all of the shocks were fully absorbed after three weeks but there is no pattern for big portfolios indicating that they absorbed the shocks more rapidly than small portfolios, and also overreaction is observed only in one out of two small portfolios of the sample.With confirming the existence of lead-lag effect in long-run by Cointegration approach, the ability of ECM models in out of sample forecasting is concerned which is measured by root mean squared error and Wilcoxon's signed-rank test. However, the results indicate that the error correction model has superior forecasting performance relative to models without the error correction terms but the Wilcoxon's signed-rank test does not reject the null hypothesis that the two RMSEs are the equal

Impacts of Electricity Efficiency Improvements on Factors Market: A Computable General Equilibrium Approach

The purpose of this paper is to study the “disinvestment effect” of a counterfactual economy-wide electricity efficiency improvement in Iran. The Researchers apply a computable general equilibrium model with special assumptions about given electricity price, heterogeneous labor market, wage rigidity and imperfect capital mobility between sectors. It was found that after a 10% electricity efficiency improvement, the capital stock declined by 9.53% and employment reduced by 9.48% in the electricity sector. Services, industries, and agriculture sectors had more capital and labor inflow respectively

Modeling Dutch Disease in the Economy of Iran: A Computable General Equilibrium Approach

In this paper, we will study the impacts of a counterfactual scenario of an increase in oil revenues on the price levels, activity levels, imports and exports in Iran. Our focus is on non-traded sectors, household welfare, and expenditure indices in the framework of a Computable General Equilibrium (CGE) model. The model is calibrated based on the 2001 Micro Consistent Matrix assuming Iran as a small open economy. The model consists of 11 production sectors, urban households, rural households, government, capital formation, exports, and imports. We concentrate on non-traded products especially rental services, public services, and construction sectors. Since part of the outputs of the construction sector relates to the capital value of buildings, we divided the demand for the construction sector into consumption and investment (seeking capital gain) purposes. In this study, we simulate the impact of a 30% increase in annual oil revenues. Based on the results, this shock leads to an increase in activity levels in the nontraded sectors and a decline in the traded sectors activity levels. Services and manufacturing show the highest increases in import levels at respectively 24% and 22%. Except for the oil and gas sector, all productive sectors experience declining exports. Public services, water, and construction sectors register the highest price increases. Results are robust to production elasticity of substitution choice, while they are sensitive to the elasticity of substitution between imports and domestic output

Impacts of Electricity Efficiency Improvements on Factors Market: A Computable General Equilibrium Approach

The purpose of this paper is to study the “disinvestment effect” of a counterfactual economy-wide electricity efficiency improvement in Iran. The Researchers apply a computable general equilibrium model with special assumptions about given electricity price, heterogeneous labor market, wage rigidity and imperfect capital mobility between sectors. It was found that after a 10% electricity efficiency improvement, the capital stock declined by 9.53% and employment reduced by 9.48% in the electricity sector. Services, industries, and agriculture sectors had more capital and labor inflow respectively

Rebound Effects Analysis of Electricity Efficiency Improvements in Iran: A Computable General Equilibrium Approach

Efficiency improvement in electricity uses leads to a decrease in its demand and consequently a decline in the market price of electricity. It is expected that the induced increase in electricity demand due to this price effect offsets part of the primary reduction in consumption, a phenomenon known as "Rebound Effects". Hence, ignorance of these effects in policymaking causes overestimation of the benefits of efficiency improvement policies. This paper aims to determine the parameters that influence the magnitude of the rebound effect theoretically and to evaluate the consequences of exogenous and costless efficiency improvement in electricity use in the context of a computable general equilibrium model. This model is calibrated using Micro Consistent Matrix (MCM) constructed based on 2001 Social Accounting Matrix (SAM) of Iran assuming a small open economy. We found that electricity efficiency improvement will result in rebound effects of 14.2%. This means that 14.2% of the primary decrease in demand is offset by rebound effects. According to our results, there are significant differences between rebound effects across electricity consuming sectors. Oil and Gas sector demonstrates the highest rebound effects. Sensitivity analysis to test the response of rebounds to the specification of elasticity of substitution between electricity and fossil fuels shows that economy-wide rebound effects changes from 11.6% to 14.2% due to changes in elasticity of substitution from 0.1 to 0.9

Drought Frequency Analysis Based on the Development of a Two-Variate Standardized Index (Rainfall-Runoff)

Drought is one of the most drastic events, which has imposed irreparable damages on human societies and may occur in any climate regime. To define drought, given its properties of multidimensionality and randomity, one cannot rely on a single variable/index (e.g., precipitation, soil moisture, and runoff). Accordingly, implementing a novel approach, this study investigated drought events in two basins with different climatic regimes, using multivariate frequency analyses of drought duration, severity, and severity peak, based on developing a Two-variate Standardized Index (TSI). The index was developed based on the concept of copula, by applying rainfall-runoff data (1974-2019) and comparing them with two popular drought indices, the Standardized Precipitation Index (SPI) and Standardized Stream Flow Index (SSFI), in terms of derived drought characteristics. The results show that TSI determined more severe drought conditions with fewer return periods than SPI and SSFI in a specific drought event. This implies that the disadvantages of SPI and SSFI might not be found in TSI. The developed index can be employed by policymakers and planners to protect water resources from drought