The Joining of Iran to WTO and its Impacts on the Importation of Capital Goods in Iranian Economy

Trade liberalization and the deletion of factors disrupting prices cause products to be produced based on competitive and comparative advantage. By making industries more competitive, imports, not least imports of capital goods, can lead to producing higher quality products in country. In other words, it can be said that importation can play an important role in trade liberalization. Therefore, analyzing impact of Iran’s joining to WTO on importation of capital goods is so important. By using Johnson Integration Model, this paper analyzes the impact of macroeconomic variables on importation of capital goods. Macroeconomic variables include real exchange rate, tariff rate, real per capita income, and war as a dummy variable. The results show that demand of imported goods is principally influenced by oscillations of real exchange rate and tariff rate. As well using adjustment coefficient obtained from Error Correction Mechanism, this paper concludes that 61 percent of disequilibrium resulted from demand of imported capital goods will be adjusted in the next period in the case of disequilibrium in the demand of imported goods.