An Empirical Analysis of Imports of Iran: A Gregory Hansen Method of Cointegration
Since the advent of the floating exchange rates during the early 1970s, and the trade liberalization during 1990s, there has been an extensive debate about the impact of exchange rates and other macro variables on imports and exports of a country. Iran has been facing depreciation in its exchange rate coupled with volatility, and declining economic growth due to its structural problems and the exogenous factors such as stringent economic sanctions in recent times. This paper investigates the impact of some of these variables such as exchange rate, world GDP, domestic GDP and the rate of Inflation on imports of Iran using the Gregory-Hansen cointegration method. The structural break is estimated using residual based method to test the null hypothesis of no cointegration against the alternative of cointegration with a structural break. The empirical analysis indicates that there exists a long run relationship between imports and these variables as they are cointegrated and there is a structural break during the year 1995. In view of these findings some policy suggestions have been made.
Imports, Exchange Rate, GDP, Inflation, Cointegration, Gregory-Hansen Method, Structural Break
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