International Conference on Eurasian Economies

4-5 November 2010 – Istanbul, TURKEY

Paper detail

Paper ID : 172
Status : Paper published
Language : English
Topic : International Trade and Globalization
Presenter: Prof. Dr. Hassan Heidari
Session : 5A International Trade

Exports, Imports and Economic Growth in Iran: An Application of Bounds Test Approach to Cointegration
Exports, Imports and Economic Growth in Iran: An Application of Bounds Test Approach to Cointegration

• Prof. Dr. Hassan Heidari (Urmia University, Iran)
• Mrs. Narmin Davoudi (Urmia University, Iran)

Abstract

This paper examines the long-run relationship between exports, imports and economic growth in Iranian economy using annual data over the period of 1960-2007. As Iran is an oil-exporting country, and oil-export boom has a direct impact on the import demand function, and it leads to higher levels of consumption that impact on growth, we emphasize the role of the imports variable in this investigation. Moreover, following recent studies about importance of human capital in endogenous growth models, we extend Feder's model (1982) by entering a proxy for human capital. As Iranian economy has been subject to numerous shocks and regime shifts, we apply Bai and Perron (2003) test to detect any possible endogenous structural breaks. Hence, investigating data properties by concerning structural breaks shows that our variables are not in the same order of integration. This property convince us to use Bounds Test approach to cointegration developed by pesaran et, al. (2001) where it can be applied irrespective of order of integration of the variables. Finally, being sure about existence a long-run relationship between variables, ARDL approach and ECM employed to argue about short-run and long-run coefficient. The results reveal that while there is significant positive relationship between exports and economic growth, the effect of imports is insignificant and also human capital has a negative effect on growth both in short and long run.

JEL codes: C22, F14

Heidari, Hassan, Davoudi, Narmin (2010). "Exports, Imports and Economic Growth in Iran: An Application of Bounds Test Approach to Cointegration" in Proceedings of International Conference of Eurasian Economies 2010, pp.295-301, Istanbul, TURKEY.

DOI: https://doi.org/10.36880/C01.00172

Full paper in PDF format.

Session 5A: International Trade