Investigating the Asymmetric effects of terms of trade on Iran's trade balance: test of J and S curves through NARDL method

Document Type : Research Paper

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Abstract

in this study, the elasticity of Iran's trade balance is investigated through terms of trade in a nonlinear and asymmetric format in the period 1978-2018. Based on the evidence, contrary to the results of linear estimation of ARDL, which showed that the terms of trade has a positive effect on the trade balance in the short and long term, examining the non-linear model of NARDL, terms of trade and oil prices showed asymmetric effects on the trade balance. The additive effect of terms of trade on the trade balance is observed in the short term equal to -0.531 and in the long term equal to 1.922, which are significant. On the other hand, the decreasing effect of terms of trade on the trade balance in the short term is equal to 2.4330 and is not significant; While in the long run, it is reported to be -0.3412 and significant. So that the increasing effect of terms of trade in the short run is associated with a decrease in the trade balance and in the long run with an improvement in the balance. Therefore, terms of trade have asymmetric effects on the trade balance in the short-term and long-term and the existence of S-curve and J-curve is confirmed in the Iranian economy. Other results show that increases in oil prices have a positive effect on the trade balance in the short term and a negative effect on the long term; But the reductions do not have a significant effect. In a way, the improvement of oil prices in the short run will increase the trade balance; But in the long run, it will reduce the trade balance. This situation confirms the phenomenon of Dutch disease in Iran.

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References

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Volume 16, Issue 2
February 2022
Pages 25-55

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History

  • Receive Date: 27 August 2021
  • Revise Date: 22 December 2021
  • Accept Date: 14 February 2022

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