Chaotic Analysis and Design of an Early Warning System for Inflation in Iran Using Markov Switching Autoregressive Approach

In Iran, one of the most important economic problems in recent decades is the phenomenon of inflation. Achieving a stable inflation rate requires the ability to use efficient and effective tools in economic policy-making. Hence, economic policymakers should have a proper understanding of the effects of the policies applied and be able to adjust their economic instruments with precise inflation forecasts. EWS has been designed and to anticipate inflationary crises and anticipate an impending incident based on signs that appear on the economy before a crisis happens. In this paper, the behavior of inflation rate has been investigated with BDS and maximum Lyapunov exponent tests, with the help of Eviews and MATLAB. If the time series of the inflation rate is non-random, a definite nonlinear function can analyze the behavior of the series with the least error. This study was intended to design a comprehensive early warning system for inflation in the country. In this regard, using the inflation rate, the critical points of the Iranian economy between the years 1990 to 2016 were identified and classified. Then, a well-designed Markov switching autoregressive model was used. The results showed that, it takes 1 to 2 periods on average for the high inflationary periods and 10 periods on average for the low inflationary periods to change direction

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