Economics Research

Abstract The main idea of this study is examination of the Impact of Terms of Trade on Investment by Johnsen-Juselius cointegration technique for Economy of Iran in (1971-2006). For this aim, we specify investment function according the present value criteria and neoclassic theory. Our model includes gross domestic production, price index, interest rate and terms of trade.   We use Johnsen-Juselius cointegration technique for estimation of this model. The result of econometric estimation has indicated a long run relationship among investment, gross domestic production, price index, interest rate and terms of trade. Our result showed GDP, price index and terms of trade have direct effect and interest rate has inverse effect on investment.

Abstract Abstract           Dichotomy among different regions is a special characteristic of developing economies including Iranian economy. This dichotomy creates various problems, to remedy these problems, it calls for serious efforts to make harmony and balance among different regions. Due to shortages of capitals in under developed regions is resulted in vast amount of unused capacities. Therefore, it is suggested to enhance the level of investments by channeling financial resources to these regions. It is further identified that resource allocation ratio to gross domestic production compared even with other Middle East countries is very low. This low ratio is blamed for coexistence of inflationary and recessionary conditions. In this study, we try to determine factors which help to facilitate investment absorption in under developed regions.           The developed and applied model is based on Wai and Wong model. This model has incorporated flexible acceleration pattern and their variable are adjusted from national level to provincial level. The hypothesis is tested for 28 provinces within 1998 -2004 by using pooled data. The results show that different provinces produce different impacts in investment.

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