Analysis of the effect of trade on economic well-being in Iran during the last half century

Abstract

Foreign trade has a substantial impact on economic welfare and various economic indicators, including growth and consumer welfare. The primary objective of this research is to examine and explicate the impact of foreign trade on economic welfare in Iran. For this aim, the research model was estimated in two forms using a distributed lag autoregressive approach from 1973 to 2022. In addition to exports and imports, the economic openness index was used to measure foreign trade, and a composite welfare index was employed to calculate economic welfare. The results of this study according to the two indexes of international trade, indicate that a positive impact of the international trade on the welfare, and the favorable effect of exports on welfare is considerably higher than the favorable influence of imports. The terms of trade as a percentage of GDP, oil and gas exports, and real GDP per capita have a positive effect on welfare, whereas inflation mitigates the welfare. According to the findings, while emphasizing the curbing of inflation and implementing strategies to improve the business environment, such as boosting non-oil exports, attracting foreign investment, removing non-tariff barriers, and stabilizing exchange rates, it is recommended that export policies should be given a higher priority compared to import ones to enhance economic welfare.Foreign trade has a substantial impact on economic welfare and various economic indicators, including growth and consumer welfare. The primary objective of this research is to examine and explicate the impact of foreign trade on economic welfare in Iran. For this aim, the research model was estimated in two forms using a distributed lag autoregressive approach from 1973 to 2022. In addition to exports and imports, the economic openness index was used to measure foreign trade, and a composite welfare index was employed to calculate economic welfare. The results of this study according to the two indexes of international trade, indicate that a positive impact of the international trade on the welfare, and the favorable effect of exports on welfare is considerably higher than the favorable influence of imports. The terms of trade as a percentage of GDP, oil and gas exports, and real GDP per capita have a positive effect on welfare, whereas inflation mitigates the welfare. According to the findings, while emphasizing the curbing of inflation and implementing strategies to improve the business environment, such as boosting non-oil exports, attracting foreign investment, removing non-tariff barriers, and stabilizing exchange rates, it is recommended that export policies should be given a higher priority compared to import ones to enhance economic welfare.

Keywords

• economic welfare
• trade
• ardl
• iran