Examining and comparing the economic effects of spillovers of investment risk in Iran: Computable general equilibrium model approach

Investment is as much as important for economic and social development that it is considered as one of the powerful levers for achieving the development. Accordingly, it is of great importance to assess the investment risk and its spillovers in all developed and developing countries because the risk phenomenon is one of the key features of decision making in the field of investment, affairs related to financial markets and a variety of economic activities. In this regard, the present paper evaluates the effect of investment risk spillover on key economic indicators using a computable general equilibrium model and the GTAP.9 database and the 2011 social accounting matrix (SAM) have been used for this purpose. Two scenarios of 10% and 3% increase in investment risk are considered in order to investigate the effect of these changes according to a recent trend analysis of economic indicators in Iran and the trend of the Iranian economy towards globalization and opening of the economy windows. The results show that both scenarios reduce investment risk, inflation, gross domestic product and total investment. Government expenditures are reduced in all sectors of the economy except for the service sector, which is almost unchanged. The exports are increased in all sectors and the imports are declined in sectors of agriculture, industry and services. As well as, the results show that the import of the oil and gas sector has not been heavily influenced by the investment risk due to its governmental status. By assessing these two scenarios and the sensitivity of the macroeconomic indicators to the degree of risk change, it can be stated that the key economic indicators will be significantly improved by managing the risk of investment; and the country will ultimately follow the development path more quickly

Examination and Comparison of the Economic Effects of International Risk Spillovers on the Iran’s Money Market by Approach the DCGE Model

Opening doors of the economy and moving toward the globalization process increase business transactions, capital mobility and at the same time economies of scale and technology transfer. Naturally, risk spillovers are occurred along with business transactions and capital mobility. They can be effective on various sectors of economy that the most important sector is the money market. Thus, the main question in this study is that do risk spillovers of the oil market has effect on Iran's money market? Given the structure of Iran's economy, one of the most important channels of transferring international risk to the country's economy is oil price changes. According to the exploration of economic effects of financial crises on oil price as well as the previous process of its changes, the seven percent decrease of oil price has been explored as the major scenario and it is tried to show its effect on macro-economic variables especially the money market. Considering the effect of international risk spillovers on macro-economic variables via structural equations, dynamic computable general equilibrium models (DCGE) are employed. The results revealed that the international risk index influences macro variables that most of them are inflation, investment, welfare and demand for money. Given that the present study was focused on the effect of international risk index on the money market, outputs of model estimation showed that the international risk spillover of oil has had an increasing effect on demand for money at first but it has gradually been led to a totally quiet stability