nep-ara New Economics Papers
on Arab World
Issue of 2009‒11‒27
seven papers chosen by
Quentin Wodon
World Bank

  1. Today versus Tomorrow: The Sensitivity of the Non-Oil Current Account Balance to Permanent and Current Income By Tamim Bayoumi; Alun H. Thomas
  2. A Cost Analysis of a Minimum Pension Guarantee for the Individual Pension System in Turkey By Sule Sahin; Adem Yavuz Elveren
  3. Trade, Technology and Skills: Evidence from Turkish Microdata By Elena Meschi; Erol Taymaz; Marco Vivarelli
  4. The role of Regime Shifts in the Term Structure of Interest Rates: Further evidence from an Emerging Market By Saltoglu, Burak; Yazgan, Ege
  5. How can Iran’s black market exchange rate be managed? By Valadkhani, Abbas; Amin Reza Kamalian; Majid Nameni
  6. Out of Sight, Out of Mind: Migration, Entrepreneurship and Social Capital By Wahba, Jackline; Zenou, Yves
  7. The Superiority of Time-Varying Hedge Ratios in Turkish Futures By Onur Olgun; Ý. Hakan Yetkiner

  1. By: Tamim Bayoumi; Alun H. Thomas
    Abstract: This paper applies the Permanent Income Model to the non-oil current accounts of the major oil exporters to assess the extent to which national consumption decisions in these countries are made on the basis of permanent versus current income. A test of whether the return on oil wealth and oil balance coefficients sum to unity is accepted for all specifications that adjust the return on wealth for future population changes. For oil-exporting countries outside Africa, around half of the fluctuations in the private sector non-oil balance are driven by considerations of changes in permanent income (the return on oil wealth) rather than current income. By contrast, for the public sector and African countries permanent income has little or no effect.
    Keywords: Africa , Consumption , Current account balances , Economic models , National income , Nonoil sector , Oil exporting countries , Oil prices , Oil revenues , Private sector , Public sector ,
    Date: 2009–09–11
  2. By: Sule Sahin; Adem Yavuz Elveren
    Abstract: The returns from individual accounts in pension schemes are subject to fluctuations in capital markets. This increases income uncertainty for the beneficiary and exposes individuals to the risk of fluctuations in the economy in general, and of the stock market in particular. This fact has recently gotten considerable attention from policymakers. A minimum pension guarantee is a way to avoid this pitfall by providing a minimum annuity regardless of the actual investment performance of individual accounts. In this study, we present a cost analysis of a minimum benefit guarantee mechanism for the Individual Pension System in Turkey, a privately managed defined contribution scheme which was introduced in 2003 as a complement to the traditional pay-as-you-go system. We examine the cost estimates and the probability of guaranteed payoffs under various economic and demographic assumptions.
    Keywords: Contribution, Individual Pension System, Pension Guarantees, Turkey
    Date: 2009
  3. By: Elena Meschi (CEE, Institute of Education, University of London); Erol Taymaz (Department of Economics, Middle East Technical University, Ankara); Marco Vivarelli (Universita Cattolica del Sacro Cuore, Milano; Institute for the Study of Labour (IZA), Bonn; Max Planck Institute of Economics, Jena; Centre for the Study of Globalisation and Regionalisation (CSGR), Warwick University)
    Abstract: In this paper we report evidence on the relationship between trade openness, technology adoption and the relative demand for skilled labour in the Turkish manufacturing sector, using firm level data over the period 1980-2001. In a dynamic panel data setting, using a unique database comprising data from 17,462 firms, we estimate an augmented cost share equation whereby the wage bill share of skilled workers in a given firm is related to international exposure and technology adoption. Both at the sectoral and firm level, it emerged that R&D expenditures are positive and significantly related to skill upgrading. This result supports the skill biased technological change argument in the case of a middle-income country such as Turkey. Moreover, the sectoral analysis revealed that increasing export towards more industrialised countries (mainly the E.U.) tends to shift the production toward less skill-intensive activities. While this result is consistent with the HOSS theorem, on the other hand import penetration from more developed countries turns out to facilitate the adoption of new technologies embodied in capital and intermediate goods, thus shifting the production toward more skill-intensive technologies. This result is confirmed by the firm level analysis that finds a positive impact of technological transfer from abroad, foreign ownership and export on the demand for skills, highlighting the role of increasing globalisation in fostering skill upgrading within firms. Our microdata also allowed us to investigate the direct impact of import flows in shaping the relative demand for skills. The results showed that those firms belonging to the sectors that most raised their inputs from more developed countries also experienced a higher increase in their labour cost share of skilled workers. This finding is a further support to the hypothesis that imports from industrialised countries imply a transfer of new technologies, in turn leading to a higher demand for skilled labour.
    Keywords: globalization, technology transfer, skills, panel data, GMM-SYS
    JEL: F16 O15 O33
    Date: 2009–11–18
  4. By: Saltoglu, Burak; Yazgan, Ege
    Abstract: In this paper, we investigate the interrelations among Turkish interest rates with different maturities by using a regime switching Vector Error Correction (VECM) model. We find a long run equilibrium relationship among interest rates with various maturities. Furthermore we conclude that term structure dynamics exhibit significant nonlinearity. Forecasting experiment also reveals that the nonlinear term structure models do fare better than other linear specifications. However, we cannot conclude that interest rate adjustments are made in an asymmetric way in the long run equilibrium.
    Keywords: Term Structure of Interest Rates; Regime Switching; Forecasting; Foreacast Evaluation; Cointegration
    JEL: C13 C22
    Date: 2009
  5. By: Valadkhani, Abbas (University of Wollongong); Amin Reza Kamalian (University of Sistan and Baluchestan, Iran); Majid Nameni (President’s Department of Strategic Planning and Control, Iran)
    Abstract: The Iranian currency (rial) depreciated on average 12.2 per cent per annum against the U.S dollar during the period 1960-1998 but, despite continued two-digit rates of inflation, the rial has witnessed only a meagre 1.7 per cent fall in its value in the post 1998 era. This paper examines this perplexing issue by identifying the major long-run determinants of the black market exchange rate. This paper uses the multivariate cointegration test, a threshold regression model and annual time series data (1960-2008) to determine exactly at what exchange rate the effect of relative prices on the exchange rate has been subject to an asymmetry adjustment process. We found that the relative CPIs in Iran and the U.S., total stock of foreign debt and the price of crude oil are the major long-run determinants of the black market exchange rate. However, the impact of relative prices (as measured by the magnitude of its elasticity) has significantly diminished from almost unity in the pre 1998 period to less than one-fourth since 1998. Based on our results, if oil prices continue to plunge, liquidity and inflation are out of control and at the same time Iran accumulates more external debt, the exchange rate will eventually exhibit an unprecedented and explosive depreciation in the coming years. No previous study has examined this issue using a threshold regression model without splitting the entire sample into two sections according to an endogenously determined threshold for the exchange rate.
    Keywords: Iran, Black market exchange rate, Threshold regression
    JEL: C22 F31
    Date: 2009
  6. By: Wahba, Jackline; Zenou, Yves
    Abstract: The aim of this paper is to investigate whether return migrants are more likely to become entrepreneurs than non-migrants. We develop a theoretical search model that puts forward the trade off faced by returnees since overseas migration provides an opportunity for human and physical capital accumulation but, at the same time, may lead to a loss of social capital back home. We test the predictions of the model using data from Egypt. We find that, even after controlling for the endogeneity of the temporary migration decision, an overseas returnee is more likely to become an entrepreneur than a non-migrant. Although migrants lose their original social networks whilst overseas, savings and human capital accumulation acquired abroad over-compensate for this loss. Our results also suggest that social networks have no significant impact on becoming entrepreneurs for returnees but matter for non-migrants.
    Keywords: entrepreneurship; savings; selection; social capital
    JEL: L26 O12 O15
    Date: 2009–11
  7. By: Onur Olgun (Department of International Trade and Finance, Izmir University of Economics); Ý. Hakan Yetkiner (Department of Economics, Izmir University of Economics)
    Abstract: This paper aims to compare the effectiveness of constant hedge ratio estimates (obtained through OLS and VECM methods) and time-varying hedge ratio estimates (obtained via M-GARCH method) for future contracts of ISE-30 index of TurkDEX. We use portfolio variance reduction as the measure of hedging effectiveness. We find that time-varying hedge ratios outperform the constant ratios for both in-sample and out-of-sample datasets and provide the minimum variance values.
    Keywords: Futures Pricing, Hedging, MGARCH, Hedging Effectiveness
    JEL: G13
    Date: 2009–11

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