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Sources Of Economic Growth In Iran: A Cointegration Analysis In The Presence Of Structural Breaks, 1960-2003

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  • Pahlavani, M.

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    Abstract

    This paper examines the major determinants of GDP growth in Iran using annual time series data spanning from 1960 to 2003. The Iranian economy has been subject to a multitude of structural changes and regime shifts during the sample period. Thus, time series properties of the data are first analysed by Zivot-Andrews (1992) model. The empirical results based on this model indicate that there is not enough evidence against the null hypothesis of unit roots for all of the variables under investigation. Taking into account the resulting endogenously determined structural breaks; the Saikkonen and Luetkephol (2000) cointegration approach is then employed to determine the long-run drivers of economic growth. This cointegration technique accommodates potential structural breaks that could undermine the existence of a long-run relationship between GDP growth and its main determinants. Empirical estimates indicate that in the long-term, policies aimed at promoting various types of physical investment, human capital, trade openness and technological innovations will improve economic growth.

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    Bibliographic Info

    Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

    Volume (Year): 5 (2005)
    Issue (Month): 4 ()
    Pages:

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    Handle: RePEc:eaa:aeinde:v:5:y:2005:i:4_5

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    Related research

    Keywords: structural break; unit root tests; cointegration technique; and Iranian economy;

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    1. Saikkonen, Pentti & Lütkepohl, Helmut, 2001. "Testing for the cointegrating rank of a VAR process with structural shifts," SFB 373 Discussion Papers 1998,82, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    2. Subrata Ghatak & Chris Milner & Utku Utkulu, 1997. "Exports, export composition and growth : cointegration and causality evidence for Malaysia," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 29(2), pages 213-223.
    3. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, Elsevier, vol. 80(2), pages 355-385, October.
    4. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
    5. Saikkonen, Pentti & L tkepohl, Helmut, 2000. "Testing For The Cointegrating Rank Of A Var Process With An Intercept," Econometric Theory, Cambridge University Press, vol. 16(03), pages 373-406, June.
    6. Gregory, A.W. & Hansen, B.E., 1992. "Residual-Based Tests for Cointegration in Models with Regime Shifts," RCER Working Papers 335, University of Rochester - Center for Economic Research (RCER).
    7. Izani Ibrahim & Craig MacPhee, 2003. "Export externalities and economic growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(3), pages 257-283.
    8. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 10(3), pages 251-70, July.
    9. Stephen Leybourne & Paul Newbold, 2003. "Spurious rejections by cointegration tests induced by structural breaks," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(9), pages 1117-1121.
    10. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers, Princeton, Department of Economics - Econometric Research Program 338, Princeton, Department of Economics - Econometric Research Program.
    11. van den Berg, Hendrik, 1997. "The relationship between international trade and economic growth in Mexico," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 1-21.
    12. L Tkepohl, Helmut & Wolters, J Rgen, 2003. "Transmission Of German Monetary Policy In The Pre-Euro Period," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 7(05), pages 711-733, November.
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    Cited by:
    1. Harvie, Charles & Pahlavani, Mosayeb, 2006. "Sources of Economic Growth in South Korea: An Application of the ARDL Analysis in the Presence of Structural Breaks - 1980-2005," Economics Working Papers, School of Economics, University of Wollongong, NSW, Australia wp06-17, School of Economics, University of Wollongong, NSW, Australia.
    2. Roula INGLESI-LOTZ & Renee VAN EYDEN & Charlotte DU TOIT, 2014. "The evolution and contribution of technological progress to the South African economy: Growth accounting and Kalman filter application," Applied Econometrics and International Development, Euro-American Association of Economic Development, Euro-American Association of Economic Development, vol. 14(1), pages 175-188.
    3. A. Nurul Hossain & Syed Hasanuzzaman, 2013. "Remittances and investment nexus in Bangladesh: an ARDL bounds testing approach," International Review of Economics, Springer, Springer, vol. 60(4), pages 387-407, December.

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