سید حسین میرجلیلی

In this study we examined output gap in the Iranian economy. The main question of the study is that how much is seasonal output gap in Iranian Economy and which factor affects gap variation. The other question is that whether using HP-F as a statistical based method for estimating output gap, provide different result than using SVAR as theory based method. Accordingly the aim of study is to estimate potential output and thus output gap using two method and analysis of the result. We used two methods (Hodrick-Prescott Filter and SVAR) to estimate quarterly output gap for the period 1988:1-2008:4. The results pointed out that the estimation is not sensitive to the method and there is a close relation between oil revenue and output gap. In the period of 1998:3-1999:3, when oil price reduced to $11.45 per barrel, Iranian economy faced with a recession and it affected on output gap with a lag. Output gap increased from 34818 in 2004:1-76782 million dollars in 2008: 4. The comparison of estimated output gap and changes of oil price in different periods point out the positive relation. According to the estimations of output gap, output gap in the Iranian Economy has intense fluctuation due to the effects of oil proceeds fluctuations. In some years, actual output is more than potential output, that is, output gap is positive and so this situation can be an important reason for inflation in that period and policy maker must do plans and policies for control of inflation and in some years, actual output is less than potential output and this means output gap was negative. This situation is a reason for unemployment in these years and therefore policy makers must do expansionary policies.

After the Islamic Revolution in Iran, investing in bonds by the private sector was recognized as incompatible in accordance with Islamic jurisprudence. Therefore Musharakah certificate substituted bond. Musharakah sukuk is bearer or registered securities issued based on certain par value for the certain period of time and sold to the investors which want to participate on execution of projects. Issuer, subject-matter of participation, on-account profit, agent and Trustee are the components of the sukuk in the Law concerned. Development of Musharakah sukuk in two phases, from it's commence in 1994 to now was explained in the article with the characteristic of some projects. In spite of remarkable successes of Musharakah sukuk in Irn, it faces some challenges.

This paper examines potential output with alternative methods for the period 1978-2008 using annual data of the Iranian economy. We applied Hodrick - Prescott Filter, Production Function and SVAR methods for estimation of annually potential output. The results show that the turning points for these methods look similar and almost produce similar results for output gap. Also the estimated potential output and output gap are conformed to economic and political events as output gap has decreased in war period (1980-1989) because of war expenditures, reducing production and therefore decreasing GDP. Also Iranian economy has been faced with negative output gap and therefore a severe recession because of the crisis in South East Asia in late 1990s. Gap trend is uprising after 2005 for the reason that happening oil shock and economic advancement for increasing oil income.

Financial Sector includes financial institutions, financial instruments, financial markets, regulations over the financial sector, and policy-making organizations in the financial sector. Financial institutions that collect deposits of the public are consist of governmental(governmental and developmental) and private banks, non-banking financial institutions, credit unions, and Gharz-ul-Hassanah Funds. Commercial insurance companies, social insurances, pension funds are contractual financial intermediaries within the Iranian economy. Investment companies that invest in securities act as investment financial institutions. In the money market, there exist banks, non-banking financial institutions, credit unions, and Gharz-ul-Hasanah Funds. The most important capital market institution in Iran is the Tehran Stock Exchange and there is no derivatives market. Financial instruments within the financial sector of the Iranian economy are stocks, Participation certificates of advantageous projects, and short term and long term deposits in banks. The major regulations over the financial sector in Iran are the law for interest-free banking operation, monetary and banking law, establishment law for securities exchange and the law for issuance methods of participation certificates, and the establishment law for central insurance of Iran and insurer. Some of the challenges within the financial sector of Iran are as follows: Bank-base-system of the financial sector, government's intervention in profit rate assignment and provision of compulsory facilities, lack of presence of private sector within the derivative market, taking effects of monetary policy from fiscal policies and the non-diversified securities within the capital market.

Islamic banks had demonstrated significant resilience during the global financial crisis, because of relying on real economic activities , avoiding toxic financial derivatives, and keeping higher liquid assets. However, they were vulnerable afterward in economic crisis. Canadian banks as an example of the most successful conventional banks during both the global financial and economic crisis, also had demonstrated significant resilience, because of institutional setting, prudential regulator, high capital-asset ratio, leverage cap, and conservative mortgage market. Islamic banks can learn from this experience and make a reform on liquidity management , corporate governance and consider the experience of resilient conventional banks.