Journal Article

No. 2012-46 | November 29, 2012
Are Current Account Deficits Sustainable? New Evidence from Iran Using Bounds Test Approach to Level Relationship PDF Icon

Abstract

This paper provides new evidence on the long-run relationship between exports and imports of the Iranian economy by employing bounds testing approach to level relationships. In Iran, there have been many unusual policy changes and/or external shocks to the economy; this has resulted in the occurrence of a multitude of structural breaks in macroeconomic variables. By taking these breaks into account, results of the present study reveal that there is a long-run equilibrium relationship between imports and exports over the sample period, 1960–2007. This result confirms the finding of Arize (Imports and exports in 50 countries: Tests of cointegration and structural breaks, 2002) by employing bounds tests to level relationships and suggests that current account deficits in Iran are sustainable.

JEL Classification

C22 F10 F32

Citation

Hassan Heidari, Salih Turan Katircioglu, and Narmin Davoudi (2012). Are Current Account Deficits Sustainable? New Evidence from Iran Using Bounds Test Approach to Level Relationship. Economics: The Open-Access, Open-Assessment E-Journal, Vol. 6, 2012-46. http://dx.doi.org/10.5018/economics-ejournal.ja.2012-46

Assessment

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