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Terms-of-Trade Shocks and the Balance of Trade in Iran:There is a Harberger-Laursen-Metzler Effect
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Abstract: (10496 Views) |
| The main purpose of this article is to study the impacts of terms-of-trade shocks on trade balance in Iran, using the HLM (Harberger – Laursen – Metzler) Effect theory. According to HLM Effect, an exogenous temporary increase in terms-of-trade of a small open economy leads to a temporary improvement in that country’s trade balance, but this effect fades away as time passes by. To study whether any systematic patterns exist in the responses of the trade balance, given to the terms-of-trade shocks, a Structural Vector Auto Regression (SVAR) model has been employed. The variables used are terms of trade (unit value of export to unit value of import) Gross Domestic Product in constant prices and trade balance (net export to Gross Domestic Product) during 1959-2010. Our results approve the idea that there exists an HLM Effect in Iran's Economy. |
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| Keywords: Trade Balance; Terms of Trade; Harberger-Laursen-Metzler Effect, Structural Vector Auto Regression |
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Full-Text [PDF 374 kb]
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Type of Study: Research |
Subject:
Special
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