American Journal of Applied Sciences

The Impact of Macroeconomic Indicators on Agricultural Trade Balance of Iran

S. Yazdani and S. Shajari

DOI : 10.3844/ajassp.2009.1473.1477

American Journal of Applied Sciences

Volume 6, Issue 8

Pages 1473-1477

Abstract

Problem statement: One of the main targets of Iran’s economic development plans in agricultural sector during the recent years was to augment agricultural exports and establish a positive trade balance in this sector. In this research the impact of macroeconomic indicators of Iran and its 20 trading partners on Iran’s agricultural trade balance had been investigated. Approach: The ARDL approach was applied during the period of (1960-2005). Results: The domestic real income had the highest effect on the agricultural trade balance relative to other indicators both in the short-and longrun period. On the other hand, domestic money supply and foreign real income had the lowest effect in long-run and short-run respectively. In addition, real exchange rate had the positive impact on trade balance indicating that the depreciation will improve trade balance. But this is not a robust political instrument for establishing long-run equilibrium. Finally, the ECM results implied the fairly high speed of adjustment to equilibrium. Conclusion: The policies that tend to increase domestic income should be planned in such a way that the increased purchasing power of people will be directed to domestic goods rather than foreign goods.

Copyright

© 2009 S. Yazdani and S. Shajari. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.