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

Shaban Mostafaee; Hasan Aama; Parvaneh Kamali Dehkordi

doi:doi:10.11648/j.ijsqa.20210702.13

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

Shaban Mostafaee, Hasan Aama, Parvaneh Kamali Dehkordi

Published in International Journal of Science and Qualitative Analysis (Volume 7, Issue 2)

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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[10]	Isard. Peter, (1995), "Exchange rate economics". International Monetary Fund. Washington Cambridge University press.
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APA Style

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

Shaban Mostafaee

Department of Economy, Payame Noor University, Tehran, Iran
Hasan Aama

Department of Economy, Payame Noor University, Kashmar, Iran
Parvaneh Kamali Dehkordi

Department of Economy, Payame Noor University, Tehran, Iran

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APA Style

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}
}

Copy | Download

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  -

Copy | Download