The effect of oil exchange receipts on import in the Islamic Republic of Iran
AbstractThis paper examines the determinants of aggregate imports in Iran between 1960 and 2000. With respect to the fact that the Islamic Republic of Iran is an oil-exporting country, and most foreign exchange earnings result from oil export, recent study variable of oil exchange receipts to variables of traditional import demand function is added. Quantitative estimates, based on multivariate and univariate co-integration analysis, indicate that oil exchange receipts, real income and relative prices all significantly determine the behaviour of total import in the long-run. Findings also show that the income elasticity generally is within the range of 0.58 to 0.76. On the other hand, relative prices elasticity is within the range of - 0.56 to - 0.67. Additionally, we have used an error correction model to show the behaviour of import demand function in the short-run. Finally, our analysis show that oil exchange receipts, as well as real income and relative prices, play a remarkable role in shaping import behaviour both in the long-run and short-run. Copyright 2006 Organization of the Petroleum Exporting Countries.