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Analysing the Trade-GDP Nexus in Iran: A Bounds Testing Approach

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Author Info
Pahlavani, Mosayeb () (University of Wollongong)
Abstract

This paper examines the major sources of economic growth in Iran using annual time series data (1960 to 2003). The time series properties of the data are analysed by Perron’s innovational outlier and additive outlier models. The empirical results based these models show that there is not enough evidence against the null hypothesis of unit root for all of the variables under investigation. Moreover, we found that the most significant structural breaks over the last four decades which have been detected endogenously in fact correspond to the regime change (e.g the 1979 Islamic revolution) and the Iraqi war in the 1980s. Finally, an ARDL methodology is employed to obtain the short and long-term determinants of economic growth. The results show that while the effects of gross capital formation and oil exports are highly significant, as expected, non-oil exports and human capital have an even smaller effect than had been anticipated.

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File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow012208.pdf
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Publisher Info
Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp05-25.

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Length: 15 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:uow:depec1:wp05-25

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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-3663
Fax: +612 4221-3725
Web page: http://www.uow.edu.au/commerce/econ/
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Related research
Keywords: structural break; unit root tests; ARDL method; Iranian economy;

Other versions of this item:

Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing

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References listed on IDEAS
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  1. Pesaran, M. H. & Smith, Ron P., 1998. "Structural Analysis of Cointegrating VARs," Cambridge Working Papers in Economics 9811, Faculty of Economics, University of Cambridge.
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  2. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326. [Downloadable!]
  3. Pack, Howard, 1994. "Endogenous Growth Theory: Intellectual Appeal and Empirical Shortcomings," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 55-72, Winter. [Downloadable!] (restricted)
  4. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73. [Downloadable!] (restricted)
  5. Stephen J. Leybourne & Paul Newbold, 2003. "Spurious rejections by cointegration tests induced by structural breaks," Applied Economics, Taylor and Francis Journals, vol. 35(9), pages 1117-1121, January. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
  7. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
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  8. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October. [Downloadable!] (restricted)
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  9. Long, N.V. & Wong, K.Y., 1996. "Endogenous Growth and International Trade: A Survey," Discussion Papers in Economics at the University of Washington 96-07, Department of Economics at the University of Washington.
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  10. McCombie, J S L & Thirlwall, A P, 1997. "The Dynamic Harrod Foreign Trade Multiplier and the Demand-Oriented Approach to Economic Growth: An Evaluation," International Review of Applied Economics, Taylor and Francis Journals, vol. 11(1), pages 5-26, January.
  11. Gene M. Grossman & Elhanan Helpman, 1991. "Trade, Knowledge Spillovers, and Growth," NBER Working Papers 3485, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. [Downloadable!] (restricted)
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