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The Relationship Between Trade and Economic Growth in Iran: An Application of a New Cointegration Technique in the Presence of Structural Breaks

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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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  • Pahlavani, Mosayeb, 2005. "The Relationship Between Trade and Economic Growth in Iran: An Application of a New Cointegration Technique in the Presence of Structural Breaks," Economics Working Papers wp05-28, School of Economics, University of Wollongong, NSW, Australia.
    • Handle: RePEc:uow:depec1:wp05-28
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    Cited by:

    1. Muhammad Shahbaz & Pervaz Azim & Khalil Ahmad, 2011. "Exports-Led Growth Hypothesis in Pakistan: Further Evidence," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 1(3), pages 182-197.
    2. Rafiq, Shuddhasawtta & Salim, Ruhul & Bloch, Harry, 2009. "Impact of crude oil price volatility on economic activities: An empirical investigation in the Thai economy," Resources Policy, Elsevier, vol. 34(3), pages 121-132, September.
    3. L. G. Burange & Rucha R. Ranadive & Neha N. Karnik, 2019. "Trade Openness and Economic Growth Nexus: A Case Study of BRICS," Foreign Trade Review, , vol. 54(1), pages 1-15, February.

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    More about this item

    Keywords

    structural break; unit root tests; cointegration technique; Iranian economy;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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