The Effect of Inequality of Income and Economic Growth on the Current Account Balance of Iran: A Vector Auto Regression (VAR) Model for Iran

Authors

1 Faculty member/ Economics Dept, Bu Ali Sin University

2 Master of Economics/ Bu Ali Sina University

Abstract

The importance of Currant account and the factors affecting it is one of the most important elements of international trade, which has always been the concern of economists. In general, the main objective of each country's economy is sustainable development, in the sense of internal and external equilibrium. Therefore, given the interplay between the internal and external sectors, any economic policy should be taken in conjunction with this relationship. Given the importance of current account equilibrium in determining the level of national income and employment, as well as in the process of growth and accumulation of capital, developing and developed countries have chosen a different policy and strategy to deal with the limitations of current account. The purpose of this study was to investigate the effect of income inequality and economic growth  on the current account balance (With oil) Iran  using VAR and direct response functions (IRF) and analysis of variance (VD) over time (1979-2016). The variables used in this paper to estimate the model include the current account balance, with the Gini coefficient as the indicator of the inequality of income and Economic growth at constant prices. The results of the research findings during the review period show that the positive shock to improving the income inequality has a negative effect on Iran's current account and the positive shock of increasing economic growth has a positive effect.

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References

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History

  • Receive Date: 02 December 2018
  • Revise Date: 08 March 2019
  • Accept Date: 09 March 2019

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