Benevolent savings and macroeconomic variables: some empirical evidence from Iran

ABSTRACT

Many studies have investigated the impact of savings on macroeconomic variables. However, there is no study on the effect of benevolent saving on macroeconomic variables. In benevolent saving/lending, households save part of their income for lending benevolently at zero interest rates to the needy population. This study applies the Toda-Yamamoto causality test on a novel quarterly time-series data provided by the Central Bank of Iran from 1988 to 2015 to test the relationship between benevolent savings and a few macroeconomic variables. The results show that benevolent savings have short-run positive effects on total consumption and total investment.

KEYWORDS:

• Benevolent saving
• benevolent lending
• macroeconomics
• Iranian banking system
• Toda-Yamamoto causality test

JEL:

• C32
• D14
• E21
• E22

Acknowledgments

Open Access funding provided by the Qatar National Library.

The authors acknowledge and appreciate the useful comments received from the editor of the journal and the reviewers. Any errors and omissions are wholly our responsibility.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. For more, please see Challe and Ragot (2015), Lindner (2015), Lindner (2015), Chamley (2014), Alves and Cardoso (2010), Mavrotas and Kelly (2001), and Sinha and Sinha (2000).

2. These banks are involved in both for-profit and non-profit activities.

3. These institutions fall in the category of non-profit organizations. In order to cover their costs, they collect only an administrative fee from the borrowers.

4. Available at https://www.cbi.ir/simplelist/1457.aspx.

5. All values are adjusted by Consumer Price index, calculated by the Central Bank of Iran, with the base year of 2015.

6. The data are available at https://tsd.cbi.ir/DisplayEn/Content.aspx.

7. Available at https://www.cbi.ir/simplelist/1457.aspx.

8. Available at https://www.cbi.ir/default_en.aspx.

9. For example, see Toda and Phillips (1993), Toda and Phillips (1994), Toda and Yamamoto (1995), Giles and Williams (2000a), Giles and Williams (2000b); Clarke and Mirza (2006), and Guru-Gharana (2012) among others.

10. See Guru-Gharana (2012) and Shahbaz et al. (2018).

11. For each variable, the sign of the causality is found by summing up the coefficients of the first ^Kth lags in Equation (2)(2) $\left[\begin{array}{c}{y}_{1t}\\ y_{2t}\\ y_{3t}\end{array}\right]=\left[\begin{array}{c}{a}_1\\ a_2\\ a_3\end{array}\right]+\sum _{i=1}^k\left[\begin{array}{c}{b}_{11,i}{b}_{12,i}{b}_{13,i}\\ b_{21,i}{b}_{22,i}{b}_{23,i}\\ b_{31,i}{b}_{32,i}{b}_{33,i}\end{array}\right]\left[\begin{array}{c}{y}_{1t-i}\\ y_{2t-i}\\ y_{3t-i}\end{array}\right]+\sum _{i=k+1}^{k+d_{max}}\left[\begin{array}{c}{b}_{11,i}{b}_{12,i}{b}_{13,i}\\ b_{21,i}{b}_{22,i}{b}_{23,i}\\ b_{31,i}{b}_{32,i}{b}_{33,i}\end{array}\right]\left[\begin{array}{c}{y}_{1t-i}\\ y_{2t-i}\\ y_{3t-i}\end{array}\right]+\left[\begin{array}{c}{e}_{1t}\\ e_{2t}\\ e_{3t}\end{array}\right]$(2) .

12. Please see file:///C:/Users/dr%20tohidi%20nia/Downloads/Instruction.pdf.

13. Please see https://www.ilo.org/dyn/natlex/natlex4.detail?p_lang=en&p_isn=91667&p_country=IRN&p_count=168.

14. Please see http://www.satba.gov.ir/suna_content/media/image/2016/06/4668_orig.pdf.

15. For example, see Mirghani et al. (2011), Febianto and Ashany (2012), and Iqbal and Shafiq (2015).

Additional information

Notes on contributors

Abolghasem Tohidinia

Dr. Abolghasem Tohidinia is an assistant professor at the Faculty of Economics, Tehran University, Iran. He has a Ph.D. in Economics from Imam Sadiq University. He has extended training and knowledge in traditional Islamic studies including Islamic history, philosophy, and theology. His key areas of research include Islamic Banking and Finance, interdisciplinary studies on economics and Islamic Law, philosophy, and religion, especially Islamic economics. His current research investigates the impact of benevolent loans on reducing poverty in Iran.

Ali Reza Oryoie

Ali Reza Oryoie is an Assistant Professor of Economics at the University of Tehran. He completed his Ph.D. in Economics at the Virginia Polytechnic Institute and State University in 2016. He works on development economics and applied econometrics.

Amin Mohseni-Cheraghlou

Dr. Amin Mohseni-Cheraghlou is an Assistant Professor of Islamic Finance and Economy at Hamad Bin Khalifa University’s College of Islamic Studies in Doha, Qatar. His areas of expertise are development macroeconomics, energy economics, Islamic economics and finance, and economies of the Middle East and North Africa. Dr. Mohseni has 13 years of consulting and policy research experience with various departments of the World Bank Group. H has taught at academic institutions in the U.S.A., Iran, and China. He writes frequently on topics related to development economics, Islamic finance and economics, and economies of the Middle East and North Africa region. He holds a Ph.D. in Economics, a Master of Arts degree in International Development, and a Bachelor of Science in Electrical Engineering.