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Iran\'s Trade Balance and Dynamics of the J-Curve Mechanism in the Uncertainty Conditions (in Persian)

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  • Tayebi, Seyyed Komail

    (Iran)

  • Yazdani, Mehdi

    (Iran)

  • Khanzadi, Azad

    (Iran)

Abstract

Devaluation of a currency is theoretically one of economic policies in removing current account deficit. This mechanism is so-called J-Curve in the external economics. According to this approach¡ a decrease in the volume of a national currency leads a decrease to trade deficit. This paper addresses the question whether uncertainty conditions such as financial and exchange crises¡ and the process of exchange rate unification in Iran should maintain the J-Curve mechanism unchanged. In fact¡ the floatation degree of exchange rate has a sustainable role in exchange rate and current account changes that are explained in the process of J-Curve.To this end¡ this research applied autoregressive technique with distributed lags to the Iranian economy and its major trading partners. In addition¡ the impact of uncertainty on the J-Curve process has been examined by impulse response functions. Basically¡ the empirical results reveal the approved stability of the J-Curve process for bilateral trade balance between Iran and its partners¡ except for China and Italy.

Suggested Citation

  • Tayebi, Seyyed Komail & Yazdani, Mehdi & Khanzadi, Azad, 2010. "Iran\'s Trade Balance and Dynamics of the J-Curve Mechanism in the Uncertainty Conditions (in Persian)," Journal of Monetary and Banking Research (فصلنامه پژوهش‌های پولی-بانکی), Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 2(3), pages 93-114, June.
    • Handle: RePEc:mbr:jmbres:v:2:y:2010:i:3:p:93-114
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