Are current account deficits sustainable? New evidence from Iran using bounds test approach to level relationships

Hassan Heidari, Salih Katircioglu () and Narmin Davoudi

Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), 2012, vol. 6, No 2012-46, 18 pages

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.

Keywords: current account; bounds test; Iran (search for similar items in EconPapers)
JEL-codes: C22 F10 F32 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifweej:201246

DOI: 10.5018/economics-ejournal.ja.2012-46

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