Research Article Open Access

Trade-GDP Nexus in Iran: An Application of the Autoregressive Distributed Lag (ARDL) Model

Mosayeb Pahlavani1, Ed Wilson1 and Andrew C. Worthington1
  • 1 School of Accounting and Finance The University of Wollongong, NSW 2522, Wollongong, Australia


This study employed annual time series data (1960-2003) and unit root tests with multiple breaks to determine the most likely times of structural breaks in major factors impacting on the trade-GDP nexus in Iran We found, inter alia, that the endogenously determined structural breaks coincided with important events in the Iranian economy, including the 1979 Islamic revolution and the outbreak of the Iraq-Iran war in 1980. By applying the Lumsdaine and Papell (1997) approach, the stationarity of the variable under investigation was examined and in the presence of structural breaks, we found that the null hypothesis of unit root could be rejected for all of the variables under analysis except one. Under such circumstances, applying the ARDL procedure was the best way of determining long run relationships. For this reason, the error correction version of the autoregressive distributed lag procedure (ARDL) was then employed to specify the short and long-term determinants of economic growth in the presence of structural breaks. The results showed that while the effects of gross capital formation and oil exports were important for the expansion of the Iranian GDP over the sample period, non-oil exports and human capital were generally less pivotal. It was also found that the speed of adjustment in the estimated models is relatively high and had the expected significant and negative sign. JEL classification numbers: C12, C22, C52.

American Journal of Applied Sciences
Volume 2 No. 7, 2005, 1158-1165


Published On: 31 July 2005

How to Cite: Pahlavani, M., Wilson, E. & Worthington, A. C. (2005). Trade-GDP Nexus in Iran: An Application of the Autoregressive Distributed Lag (ARDL) Model. American Journal of Applied Sciences, 2(7), 1158-1165.

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  • Structural breaks
  • unit root test
  • autoregressive distributed lag (ARDL) procedures