s-curve analysis in bilateral trade relations between iran and its major trading partners (1992-2011)

national currency depreciation or appreciation has always been argued seriously among policymakers since changing in exchange rate could cause improvement or deficit in trade balance. these changes affect the trade volume of a country in both short run and long run. long run effects are recognized as the marshall lerner condition while short run effects are analyzed by two concepts: j curve and s curve. in this study the cross correlation has been calculated between trade balance and real exchange rate by using bilateral trade data between iran and 21 selected trading partners over the period 1992 2011 in order to explore the existence of s curve in iran. based on the results there is an s shaped curve for the iranian trade relations with 14 major trading partners. however this pattern does not match in relations with syria pakistan qatar armenia kuwait azerbaijan canada us and hong kong. furthermore the empirical results confirm harberger larsen metzler effect in iran`s trade relations with most of its trading partners. according to the results obtained changes in exchange rate leads to a temporary improvement in iran’s balance of payments but this improvement reduces the exchange rate after a while. jel classification: f1 f14 o24