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This paper provides new evidence on the long-run relationship between exports and imports of the Iranian economy by employing bounds testing approach to level relationships. In Iran, there have been many unusual policy changes and/or external shocks to the economy; this has resulted in the occurrence of a multitude of structural breaks in macroeconomic variables. By taking these breaks into account, results of the present study reveal that there is a long-run equilibrium relationship between imports and exports over the sample period, 1960-2007

This paper examines the long-run relationship between exports, imports and economic growth in Iranian economy using annual data over the period of 1960-2007. As Iran is an oil-exporting country, and oil-export boom has a direct impact on the import demand function, and it leads to higher levels of consumption that impact on growth, we emphasize the role of the imports variable in this investigation. Moreover, following recent studies about importance of human capital in endogenous growth models, we extend Feder's model (1982) by entering a proxy for human capital. As Iranian economy has been subject to numerous shocks and regime shifts, we apply Bai and Perron (2003) test to detect any possible endogenous structural breaks. Hence, investigating data properties by concerning structural breaks shows that our variables are not in the same order of integration. This property convince us to use Bounds Test approach to cointegration developed by pesaran et, al. (2001) where it can be applied irrespective of order of integration of the variables. Finally, being sure about existence a long-run relationship between variables, ARDL approach and ECM employed to argue about short-run and long-run coefficient. The results reveal that while there is significant positive relationship between exports and economic growth, the effect of imports is insignificant and also human capital has a negative effect on growth both in short and long run.

This paper attempts to solve and estimate a Markov-Switching Dynamic Stochastic General Equilibrium (MS-DSGE) model with deep habit-adjusted consumption in both private and public sectors for Iranian data from 1991 to 2015. A comprehensive New Keynesian Philips Curve (NKPC) is also extracted, including stock of private and public habit consumption in firm's profit maximization problem as a constraint. The model is estimated both with constant parameters and regime switching in monetary reaction function, and it is concluded that the model with regime switching is able to fit the Iranian data better. The results of estimating parameters indicate that the degree of habit formation, together with the persistence of habit stock, are significant parameters. However, it is shown that deep habits do not succeed in reducing inflation in Iranian economy in reaction to a monetary shock. The results confirm that consumption increases and inflation decreases, simultaneously in response to fiscal shocks.