Evaluation of Asymmetric Co-integration of Real Exchange Rate and Trade Balance in Iran (TAR and M-TAR Model)

Subject Areas : Labor and Demographic Economics

Received: 2015-05-03 Accepted : 2015-05-03 Published : 2009-04-01

Keywords: Key Words: Asymmetric Co-integration, Momentum Threshold Autoregressive (M-TAR), Threshold Error Correction Model,

Abstract :

     In this article, the asymmetric co-integration of trade balance, export and import and exchange rate is investigated by applying Endres-Siklos Method, so TAR and M-TAR models are used. The results of estimating the said models show that there is an asymmetric co-integration between trade balance (non-oil), export (non-oil), import and exchange rate. Meantime, Threshold Error Correction Model has been estimated to investigate short run dynamics of the said variables with regard to the exchange rate. The findings indicate that the main hypothesis of the model, i.e. asymmetric co-integration between real exchange rate and trade balance, is approved. Furthermore, based on the results, the adjustment speed of the trade balance is higher when standing above its equilibrium point.                 

References:

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