Short-term and Long-term Effects of exchange Rate on Bilateral Trade between Iran and the European and Asian partners (Using the Approach Panel Fmols)

With a view to efforts of some countries for the devaluation of the national currency, one of the most important questions in the field of International economics is "whether this devaluation, leads to current account improvement or not? In order to study this important question, this paper is aimed to study the short-run and long-run Effects of the Exchange rate on the trade balance between Iran and selected set trade partner countries in Europe, Asian and the rest of the world. The results of applying Error correction of the Panel data method via FMOLS Estimators demonstrate that real exchange rate variable is negative and insignificant in long-run for the European partners. But this is positive and significant for Asian and whole the world's partners. These results show that while the real exchange rate coefficient in short-run is significant and positive for European, Asian and the world's economic partners, the exchange rate in long-run is ineffective on Iran's balance trade. So these results show that exchange rate enhancement (devaluation) causes an Improvement in the trade balance in the short run. However, these effects disappear in the long run. So the findings show the disapproval of J-Curve for all the partners. Moreover, change in GDP of partners and Iran have significant effects, and their estimated signs are positive and negative respectively.