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Are Current Account Deficits Sustainable?

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Are Current Account Deficits Sustainable?
Vol. 6, 2012-46 | November 29, 2012 | http://dx.doi.org/10.5018/economics-ejournal.ja.2012-46

Are Current Account Deficits Sustainable? New Evidence from Iran Using Bounds Testing Approach to Level Relationships
Hassan Heidari
Urmia University

Salih Turan Katircioglu
Eastern Mediterranean University

Narmin Davoudi
Islamic Azad University Abstract 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. JEL C22, F10, F32 Keywords Current account; bounds test; Iran Correspondence Hassan Heidari, Department of Economics, Urmia University, Urmia, Iran; e-mail: h.heidari@urmia.ac.ir. Salih Turan Katircioglu, Department of Banking and Finance, Eastern Mediterranean University, North Cyprus, Turkey; e-mail: salihk@emu.edu.tr. Narmin Davoudi, Islamic Azad University, Mahabad Branch, Faculty of Management, Mahabad, Iran; e-mail: ndavudi@hotmail.com.
Citation Hassan Heidari, Salih Turan Katircioglu, and Narmin Davoudi (2012). Are Current Account Deficits Sustainable? New Evidence from Iran Using Bounds Testing Approach to Level Relationships. Economics: The Open-Access, Open-Assessment E-Journal, Vol. 6, 2012-46. http://dx.doi.org/10.5018/economics-ejournal.ja.2012-46 © Author(s) 2012. Licensed under a Creative Commons License -
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