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Investigating the Marshall-Lerner’s Condition Regarding the Intermediate Goods Importing in Iran’s Economy

Received: 6 October 2021     Accepted: 28 October 2021     Published: 19 November 2021
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Abstract

The Marshal-Lerner’s condition is an answer to this question: Can a devaluation of the currency improve the balance of payments (net export value) in the country's interest? This condition is with some hypotheses that one of them is the independence of exports from imports. Concerning the statistical evidences of Iran’s economy based on the statistics of the Central Bank, it is specified that more than 80 percent of Iran’s imported goods are the intermediate goods (investing and intermediate). Therefore, in this research, we have examined the mentioned condition by considering exports as a function of imports. Firstly, regarding the exports as the function of imports, the Augmented Marshal-Lerner’s condition has been extracted, then for investigating the Marshal-Lerner’s condition in Iran using the Auto-Regression Distributed Lag (ARDL) during the 1961-2020, we have estimated the demand functions of import and export. The scientific results of the study show that by violating the condition of independence of exports and imports, an amount equal to the elasticity of imports relative to the real exchange rate in the elasticity of exports relative to imports is added to the Marshall-Lerner’s condition. The experimental results of the research, based on the estimation of the extractive model of the scientific sector, do not confirm the establishment of the Augmented Marshall-Lerner condition in the Iranian economy. Therefore, the devaluation policy cannot help improve the trade balance.

Published in International Journal of Science and Qualitative Analysis (Volume 7, Issue 2)
DOI 10.11648/j.ijsqa.20210702.13
Page(s) 61-68
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2021. Published by Science Publishing Group

Keywords

Marshall-Lerner’s Condition, Balance of Payments, Intermediate Goods, Real Exchange Rate, ARDL Approach

References
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    Shaban Mostafaee, Hasan Aama, Parvaneh Kamali Dehkordi. (2021). Investigating the Marshall-Lerner’s Condition Regarding the Intermediate Goods Importing in Iran’s Economy. International Journal of Science and Qualitative Analysis, 7(2), 61-68. https://doi.org/10.11648/j.ijsqa.20210702.13

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    ACS Style

    Shaban Mostafaee; Hasan Aama; Parvaneh Kamali Dehkordi. Investigating the Marshall-Lerner’s Condition Regarding the Intermediate Goods Importing in Iran’s Economy. Int. J. Sci. Qual. Anal. 2021, 7(2), 61-68. doi: 10.11648/j.ijsqa.20210702.13

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    AMA Style

    Shaban Mostafaee, Hasan Aama, Parvaneh Kamali Dehkordi. Investigating the Marshall-Lerner’s Condition Regarding the Intermediate Goods Importing in Iran’s Economy. Int J Sci Qual Anal. 2021;7(2):61-68. doi: 10.11648/j.ijsqa.20210702.13

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  • @article{10.11648/j.ijsqa.20210702.13,
      author = {Shaban Mostafaee and Hasan Aama and Parvaneh Kamali Dehkordi},
      title = {Investigating the Marshall-Lerner’s Condition Regarding the Intermediate Goods Importing in Iran’s Economy},
      journal = {International Journal of Science and Qualitative Analysis},
      volume = {7},
      number = {2},
      pages = {61-68},
      doi = {10.11648/j.ijsqa.20210702.13},
      url = {https://doi.org/10.11648/j.ijsqa.20210702.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijsqa.20210702.13},
      abstract = {The Marshal-Lerner’s condition is an answer to this question: Can a devaluation of the currency improve the balance of payments (net export value) in the country's interest? This condition is with some hypotheses that one of them is the independence of exports from imports. Concerning the statistical evidences of Iran’s economy based on the statistics of the Central Bank, it is specified that more than 80 percent of Iran’s imported goods are the intermediate goods (investing and intermediate). Therefore, in this research, we have examined the mentioned condition by considering exports as a function of imports. Firstly, regarding the exports as the function of imports, the Augmented Marshal-Lerner’s condition has been extracted, then for investigating the Marshal-Lerner’s condition in Iran using the Auto-Regression Distributed Lag (ARDL) during the 1961-2020, we have estimated the demand functions of import and export. The scientific results of the study show that by violating the condition of independence of exports and imports, an amount equal to the elasticity of imports relative to the real exchange rate in the elasticity of exports relative to imports is added to the Marshall-Lerner’s condition. The experimental results of the research, based on the estimation of the extractive model of the scientific sector, do not confirm the establishment of the Augmented Marshall-Lerner condition in the Iranian economy. Therefore, the devaluation policy cannot help improve the trade balance.},
     year = {2021}
    }
    

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  • TY  - JOUR
    T1  - Investigating the Marshall-Lerner’s Condition Regarding the Intermediate Goods Importing in Iran’s Economy
    AU  - Shaban Mostafaee
    AU  - Hasan Aama
    AU  - Parvaneh Kamali Dehkordi
    Y1  - 2021/11/19
    PY  - 2021
    N1  - https://doi.org/10.11648/j.ijsqa.20210702.13
    DO  - 10.11648/j.ijsqa.20210702.13
    T2  - International Journal of Science and Qualitative Analysis
    JF  - International Journal of Science and Qualitative Analysis
    JO  - International Journal of Science and Qualitative Analysis
    SP  - 61
    EP  - 68
    PB  - Science Publishing Group
    SN  - 2469-8164
    UR  - https://doi.org/10.11648/j.ijsqa.20210702.13
    AB  - The Marshal-Lerner’s condition is an answer to this question: Can a devaluation of the currency improve the balance of payments (net export value) in the country's interest? This condition is with some hypotheses that one of them is the independence of exports from imports. Concerning the statistical evidences of Iran’s economy based on the statistics of the Central Bank, it is specified that more than 80 percent of Iran’s imported goods are the intermediate goods (investing and intermediate). Therefore, in this research, we have examined the mentioned condition by considering exports as a function of imports. Firstly, regarding the exports as the function of imports, the Augmented Marshal-Lerner’s condition has been extracted, then for investigating the Marshal-Lerner’s condition in Iran using the Auto-Regression Distributed Lag (ARDL) during the 1961-2020, we have estimated the demand functions of import and export. The scientific results of the study show that by violating the condition of independence of exports and imports, an amount equal to the elasticity of imports relative to the real exchange rate in the elasticity of exports relative to imports is added to the Marshall-Lerner’s condition. The experimental results of the research, based on the estimation of the extractive model of the scientific sector, do not confirm the establishment of the Augmented Marshall-Lerner condition in the Iranian economy. Therefore, the devaluation policy cannot help improve the trade balance.
    VL  - 7
    IS  - 2
    ER  - 

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Author Information
  • Department of Economy, Payame Noor University, Tehran, Iran

  • Department of Economy, Payame Noor University, Kashmar, Iran

  • Department of Economy, Payame Noor University, Tehran, Iran

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