Preview

Are Current Account Deficits Sustainable?

Good Essays
Open Document
Open Document
6315 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
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 -
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Powerful Essays

    Discuss the Economic Implcations for the Australian Economy of Australia's Continuing Current Account Deficits.
    • 2210 Words
    • 9 Pages

    Discuss the Economic Implcations for the Australian Economy of Australia's Continuing Current Account Deficits.

    Australia has a long history of large and persistent current account deficits. During the 1960s the current account deficit averaged the equivalent of 2 per cent of gross domestic product. The CAD rose considerably, due to the floating of the Australian dollar and the opening of the capital account in 1980s, and by 1990s CAD has sustained around an average of about 4.5 per cent of GDP. However, in recent years the deficit has been falling and in 2011 it was just 2.25 per cent.…

    • 2210 Words
    • 9 Pages
    Powerful Essays
    Read More
  • Better Essays

    ECO 372 Week 3 Learning Team
    • 1516 Words
    • 6 Pages

    ECO 372 Week 3 Learning Team

    The United States current economic status has improved from 2010 to 2012, as far as, unemployment rates, consumer income, and (lower) interest rates are concerned. When we examine the Gross Domestic Product, we are continuing to increase the United States debts. In 2009, the United States estimated GDP (purchasing power parity) was $14.38 trillion, which increased $0.44 trillion in 2010. From 2010, the GDP at $14.82 trillion increased $0.22 trillion, putting the U.S. at 15.04 trillion in debt (Stephanie Mandell, 2012).…

    • 1516 Words
    • 6 Pages
    Better Essays
    Read More
  • Powerful Essays

    Cambridge Labs Case Analysis
    • 5443 Words
    • 22 Pages

    Cambridge Labs Case Analysis

    Karunaratne, N. (2010). The sustainability of Australia 's current account deficits—A reappraisal after the global financial crisis. Journal of Policy Modeling, 32(1), 81-97. doi:10.1016/j.jpolmod.2009.10.002…

    • 5443 Words
    • 22 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    CHAPTER16Government DebtQuestions For Review1 What Is
    • 2381 Words
    • 8 Pages

    CHAPTER16Government DebtQuestions For Review1 What Is

    3. Standard measures of the budget deficit are imperfect measures of fiscal policy for at…

    • 2381 Words
    • 8 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Vincent Canby's The Last Temptation Of Christ
    • 1732 Words
    • 7 Pages

    Vincent Canby's The Last Temptation Of Christ

    Of course this 1970s setting was not popular for all critics. In a New York Times article by Vincent Canby in 1973, titled “The Gospel According to ‘Godspell’ Comes to Screen: The Cast,” Canby criticized the over emphasis of a hippie Jesus. He states, “‘Godspell’ pretty much reduces the story of Jesus to conform to a kind of flower-child paranoia that was probably more popular three or four years ago than it is today: the only way to survive in this world is to drop out of it, which, if you think about it, effectively reverses Jesus' instructions to the disciples.” Nonetheless, this artistic and cultural take of Jesus shows a discernable shift from Jesus films in the earlier 20th century such as The King of Kings and The Life and Passion of Jesus Christ. The emphasis of the Jesus story is no longer on the performance of the text as accurately as possible but perhaps the meaning behind the biblical texts. While wacky to some, Godspell does…

    • 1732 Words
    • 7 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    That Use to Be Us
    • 2581 Words
    • 11 Pages

    That Use to Be Us

    Santow, L. J. (1988). The budget deficit: the causes, the costs, the outlook. New York, N.Y.: New York Institute of Finance.…

    • 2581 Words
    • 11 Pages
    Powerful Essays
    Read More
  • Better Essays

    History of U.S. Trade Deficit
    • 1130 Words
    • 5 Pages

    History of U.S. Trade Deficit

    The United States has traditionally run stagnant trade surplus/deficits up until the 1970s. The only exception was during World War II. During the war the U.S. was importing goods at high rates as most of the work force was fighting overseas. The U.S. began running a trade deficit in 1971 and has continued to do so, with the exception of 1975, until today (Balance on goods, 2012). The cause for the deficit in the 1970s can be attributed to a number of factors (e.g. oil prices, value of U.S. dollar). Most notably, the United States experienced large price changes in oil as a result of the oil crisis’. The U.S. reached peak oil production in the early 1970s which caused U.S. oil exports to decrease dramatically. This began the downward trend that would continue well into the 21st century (Bernheim, 1988).…

    • 1130 Words
    • 5 Pages
    Better Essays
    Read More
  • Powerful Essays

    Effects of Long-Term Deficit Spending
    • 1687 Words
    • 7 Pages

    Effects of Long-Term Deficit Spending

    Slivinski, S. (2010, July). Do deficits matter? And, if so, how? (Region focus, second quarter, 2010). Retrieved from Richmond Fed website: http://www.richmondfed.org/publications/research/region_focus/2010/q2/pdf/cover_story.pdf…

    • 1687 Words
    • 7 Pages
    Powerful Essays
    Read More
  • Satisfactory Essays

    Lp 9 Assignment
    • 512 Words
    • 3 Pages

    Lp 9 Assignment

    We are assuming that a country’s real growth is 2 percent per year while its real deficit is rising 5 percent per year. I do not think a country can afford such deficits indefinitely simply because of the fact that borrowing will cause the interest rates to rise and remain high for an extended period of time. This increase of rates will devalue currency and lead to investment decrease causing the economy to go into a recession.…

    • 512 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    Government Entitlement Programs
    • 735 Words
    • 3 Pages

    Government Entitlement Programs

    (2016). The Econometrics Analysis of the Relation between the Current Accounts Deficit and the Budget Deficit of the Social Security Institution. Sosyoekonomi, 24(27).…

    • 735 Words
    • 3 Pages
    Good Essays
    Read More
  • Better Essays

    Assess The Contribution Of Functionalism To Our Understanding Of Society
    • 1172 Words
    • 5 Pages

    Assess The Contribution Of Functionalism To Our Understanding Of Society

    The key concepts within functionalism are collective conscience, that all of society must have shared values and beliefs as it is crucial to achieve social order for the well being of society, they believe that this can be achieved through value consensus, that for society to live in consensus it must socialise its members into a set of norms and values to ensure society can work harmoniously and to meet it’s basic needs and goals. They stress the positive role of the family and education on its importance to help maintain society and justify how crime and deviance is essential in society to maintain order; they also believe that the media can perpetuate the…

    • 1172 Words
    • 5 Pages
    Better Essays
    Read More
  • Powerful Essays

    The Us Budget Deficits
    • 2548 Words
    • 11 Pages

    The Us Budget Deficits

    The role of government in the U.S economy extends far beyond its activities as a regulator of specific industries or gatekeeping. The government is also responsible for managing the overall pace of economic activity, with its objective of maintaining high levels of employment and controlling price stability (inflation). It has two main tools for achieving these goals: fiscal policies, which is done through taxes and spending and monetary policies, through which it manages the supply of money. In this paper, I will discuss the why high deficits of today will reduce growth rate of the economy in the future, look at the history of our nation’s debt and deficits, different elements that causes of deficit and why the cause actually matters, what role the fiscal and monetary policies have to lead to higher or lower budget deficits and how deficits affect the overall long-term economic growth and debt of the U.S.…

    • 2548 Words
    • 11 Pages
    Powerful Essays
    Read More
  • Good Essays

    Understanding the Us Trade Deficit
    • 690 Words
    • 2 Pages

    Understanding the Us Trade Deficit

    The US trade deficit has been a cause for much debate in recent years. Most people recognize that a trade deficit has a negative connotation, but many cannot articulate why.…

    • 690 Words
    • 2 Pages
    Good Essays
    Read More
  • Good Essays

    Budget Deficit & National Debt
    • 891 Words
    • 4 Pages

    Budget Deficit & National Debt

    The purpose of this paper is to discuss the short- and long-term effects of current budget deficits and the nation debt. In order to do this; I first had to find out exactly what they were. I will also discuss whether I think the government should operate with a balanced budget.…

    • 891 Words
    • 4 Pages
    Good Essays
    Read More
  • Best Essays

    Sovereignty of Maldives
    • 1296 Words
    • 6 Pages

    Sovereignty of Maldives

    Deficit level has endangered the sovereignty of the nation. Expenditure in the country has exceeded income, and as a result, the budget deficit is increasing. Fiscal control became progressively worse due to increased government spending. The country last year spent 63.1 percent of its GDP on government expenses. (Robinson, 2012).…

    • 1296 Words
    • 6 Pages
    Best Essays
    Read More

Related Topics