Currency Devaluation and Demands for Imports: Case of Iran (1959‐2008)

Subject Areas : Applied Economics

یداله  رجایی ¹ (میئول مکاتبات)
شهلا  احمدی ² (ندارد)

Received: 2011-01-05 Accepted : 2011-06-18 Published : 2010-12-22

Keywords: intermediate goods, capital goods, real income, GDP, exchange&#x0D, &#x0D, rate,

Abstract :

In this study, we investigate the long‐run relationship between demand forimports and the relevant determining factors. We use the method of leastSquares Engel Granger (1987) and Maximum Likelihood Johansen (1988) aswell as Joe Hansen and Joe Sylyvs (1990) to estimate the Long‐Run ImportDemand Function.To have a better assessment of the effectiveness of trade policies; a logicalunderstanding of demand for imports is of particular importance. Our studyshows that the oil revenue, real income, and GDP evaluated at domesticprices, are positively related to demand for imports. On the other hand, therises of price of imported goods relative to the price of domestically producedgoods and currency devaluation have a negative effect on demands forimports of intermediate goods as well as consumption and capital goods.