Is Free Trade Non-Linear Driver Agricultural Growth and Trade? Lessons Learnt from Iran

Fariba Abbasi, Reza Moghaddasi, Ali Kianirad

Abstract

The primary purpose of this study is to quantify the impacts of trade liberalization on the growth and trade of agricultural products in Iran as one of the leading indicators of globalization on macroeconomic indicators. Also, study the short-term and long-term effects on the liberalization of growth and trade of agricultural products and Study the existence of a non-linear relationship on the liberalization of growth and trade of agricultural products. Iran has been trying to liberalize its trade regime since 1995 in order to increase its growth and trade performance. Despite a long period of liberalization, however, imports still outpace exports widening the trade deficit. Experimental results show that liberalization by reducing the import duty rate in the short-term increases exports by 1.56 percent, but in the long term reduces the number of imports by about 7.65 percent. Estimating the growth showed that the liberalization index in both regimes has a positive and significant effect on agricultural growth. This means that the implementation of trade liberalization policy in the period under study had a positive effect on the growth of the agricultural sector. Therefore, trade liberalization in the short term leads to growth in exports, and in the long term, increased production leads to an increase in exports and a decrease in imports and economic growth.

 

Keywords: trade liberalization, agricultural trade, agricultural growth, Markov switching, Iran.


Full Text:

PDF


References


MONJURUL, H.M., and ZULKORNAIN, Y. Impacts of trade liberalization on aggregate import in Bangladesh: An ARDL Bounds test approach. Journal of Asian Economics, 2010, 21: 37–52.

FETROS, M.H., SOHEILI, K., TEYMOURI, B., and HEYDARI, S. The effect of monetary policy on the trade balance in the oil-rich countries of the Persian Gulf Investigation of the effect of economic freedom on life expectancy (Study of selected countries, including Iran, with a consolidated data approach). Journal of Economic Strategies, 2012, 1(3): 169-193.

FRIEDMAN, M. Capitalism, and freedom. The University of Chicago Press. 1962.

AHMED, N.U. Export Responses to Trade Liberalization in Bangladesh: A Counteraction Analysis. Applied Economics, 2000, 32(8): 1077–1084.

KHAN, F.C. Household disaggregation. UK: Cambridge University Press, 1997.

KRUEGER, A.O. Foreign trade regimes, and economic development: Liberalization attempts and consequences. Cambridge, MA: Ballinger for National Bureau of Economic Research, 1978.

MICHAELY, M., PAPAGEORGIOU, D., and CHOKSI, A. Liberalizing foreign trade. London and New York: Oxford University Press, 1991.

SINGH, A. Financial liberalization and globalization: Implications for industrial and industrializing economies. New York: Palgrave, 2001.

STIGLITZ, J.E. Two principles for the next round or, how to bring the developing countries from the cold. The World Economy, 2000, 23: 437–454.

GREENAWAY, D. LEYBOURNE, S., and SAPSFORD, D. Modeling Growth (and Liberalization) Using Smooth Transitions Analysis. Economic Inquiry, Western Economic Association International, 1997, 35(4): 798-814.

GUPTA, S.D., and CHOUDHRY, N.K. Globalization, growth, and sustainability: An introduction. Massachusetts, USA: Kluwer Academic Publishers, 1997.

IMADA, P. Production and trade effects of an ASEAN free trade area. The Developing Economies, 1993, XXXI(1): 3–23.

MILLER, S.M., and MUKTI, P.U. The effects of openness, trade orientation, and human capital on total factor productivity. Journal of Development Economics, 2000, 63: 399–423.

YANIKKAYA, H. Trade Openness, and Economic Growth: A Cross Country Empirical Investigation. Journal of Development Economics, 2003, 72: 57-89.

DONGMEI, L., ZHIHONG, S., and LIBO, F. A Markov regime-switching model on Foreign Trade: The Case of China. International conference on management and service science, 2011.

IHEANACHO, E. ARDL Approach to Trade Liberalization and Economic Growth in the Developing Country: Evidence from Nigeria. An International Multi-Disciplinary Journal. Ethiopia Afrrev, 2017, 11(2): 138-159

HOZOURI, N. The Effect of Trade Liberalization on Economic Growth: Selected MENA Countries. International Journal of Economics and Finance, Canadian Center of Science and Education, 2017, 9(1): 88-95.

SÈNA, K.G. Multilateral Trade Liberalization and Economic Growth. Journal of Economic Integration, 2018, 33(2): 1261-1301

EMRAH, İ., ÇEVIK, E., and TURHAN, K. Trade Openness and Economic Growth in Turkey: A Rolling Frequency Domain Analysis. International Journal of Economics, 2019, 7(2): 1-16.

HUSTED, S., and MELVIN, M. International economics. USA: Wesley Longman, 2001.

GOLDFELD, S.M., and QUANDT, R.E. A Markov Model for Switching Regressions. Journal of Econometrics, 1973, 1(1): 3-15.

WACZIARG, R., and WELCH, K.H. Trade Liberalization and Growth: New Evidence. The World Bank Economic Review, 2008, 22(2): 187–231.

VARGHESE, N. The Effect of Trade Liberalization on Indian Groundnut Exports: A Markova Analysis. Journal of Business & Economic Policy, 2014, 1(1): 1-8.

KHOR, M. Globalization, and the south: Some critical issues. UNCTAD Discussion papers No.147. UNCTAD, 2000.

CYRIELLE, G. Trade Liberalization and Export Performance: A Literature Review. Journal of Political Economy, 2017, 127: 25-46.

UNCTAD. Payments deficits, liberalization, and growth in developing countries. Trade and Development Report (TDR), UN, NY, and Geneva (Chapter IV), UNCTAD, 1999.

QUANT, R.E. A New Approach to Estimating Switching Regression. Journal of the American Statistical Association, 1972, 67: 306-310.

HAMILTON, J.D. A new approach to the economic analysis of no stationary time series and the business cycle. Econometrical, 1989, 57(2): 357-384.

KIM, S., and BHATTACHARYA, R. Regional Housing Prices in the USA: An Empirical Investigation of Nonlinearity. Journal of Real Estate Finance and Economics, 2009, 38(4): 443-460.

IGOR, A.C., DE MORAIS, M., and SAVINO, P. A Markov Switching Model for the Brazilian Demand for Imports: Analyzing the Import Substitution Process in Brazil. Brazilian Review of Econometrics, 2005, 25(2): 173–218.

COLOGNI, A., and MANERA, M. The asymmetric effects of oil shocks on output growth: A Markov–Switching analysis for the G-7 countries. Economic Modelling, 2009, 26(1): 1-29.

DAI, M., ZHANG, Q., and ZHU, Q.J. Trend Following Trading under a Regime Switching Model. Society for Industrial and Applied Mathematics, 2010, 1: 780–810.

FEI, C., FRANCIS, X., and DIEBOLD, F.S. A Markov-Switching Multi-Fractal Inter- Trade Duration Model. National Bureau of Economic Research, NBER Working Paper, 2012, 18078: 1-61.

PIERRE, E.G., and MASSIMILIANO, G. Regime Switches in the Risk-Return Trade-Off. Bank of Canada Working Paper, 2013, 51: 1- 40.

KROLZIG, H.M. Markov-Switching vector Auto-regressions modeling, Statistical inference, and applications to business cycle analysis. Berlin: Springer, 1997.

ANG, A., and BEKAERT, G. Regime switches in interest rates. Journal of Business & Economic Statistics, 1998, 20(2): 163-182.

IRHAN, H.B., ALACAHAN, N.D., and KORAP, L. An empirical model for the Turkish trade Balance: new evidence from ARDL bounds testing analyses. Istanbul University econometrics and statistics e-Journal, Department of econometrics. Faculty of Economics. Istanbul University, 2011, 14(1): 38-61.

YAYA, M.E., and LU, X. The Short-Run Relationship between Real Effective Exchange Rate and Balance of Trade in China. International Journal of Applied Economics, 2012, 9(1): 15-27.

KENNEDY, O. Kenya, s foreign trade balance: An empirical investigation. European Scientific Journal, 2013, 9(19): 176-189.

RAY, S. An analysis of determinants of the balance of trade in India. Research Journal of Finance and Accounting, 2012, 3(1): 73-83.

INTERNATIONAL LABOUR ORGANIZATION, 1996-2021. https://www.ilo.org/global/lang--en/index.htmhttp


Refbacks

  • There are currently no refbacks.