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Are current account deficits sustainable? New evidence from Iran using bounds test approach to level relationships

  • Heidari, Hassan
  • Katircioglu, Salih Turan
  • Davoudi, Narmin

This paper provides new evidence on the long-run relationship between exports and imports of the Iranian economy by employing bounds testing approach to level relationships. In Iran, there have been many unusual policy changes and/or external shocks to the economy; this has resulted in the occurrence of a multitude of structural breaks in macroeconomic variables. By taking these breaks into account, results of the present study reveal that there is a long-run equilibrium relationship between imports and exports over the sample period, 1960-2007. This result confirms the finding of Arize (Imports and exports in 50 countries: Tests of cointegration and structural breaks, 2002) by employing bounds tests to level relationships and suggests that current account deficits in Iran are sustainable.

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File URL: http://dx.doi.org/10.5018/economics-ejournal.ja.2012-46
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File URL: http://econstor.eu/bitstream/10419/67476/1/731423690.pdf
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Article provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.

Volume (Year): 6 (2012)
Issue (Month): ()
Pages: 1-18

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Handle: RePEc:zbw:ifweej:201246
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  25. Kalyoncu, Huseyin, 2005. "Sustainability of Current Account for Turkey: Intertemporal Solvency Approach," MPRA Paper 1220, University Library of Munich, Germany.
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