The Determinants of Current Account in IRAN Economy: A Structural Approach

Current account is one of the most important performance indicators in any economy. the current account position remains a very important policy concern.This article investigates the determinants of current account in IRAN using quarterly data. This study develops an open economy heterogeneous-agent theoretical model, and tests the implications of the model by estimating structural vector autoregression (SVAR) empirical models. A theoretical working model of the current account closely follows Bussiere et al.-(2004), Daniel (1993) and Bergin and Sheffrin (2000).But here is a special feature of Iran's economy such as exchange rate and oil dependency.
We impose identifying restrictions with following Gali (1992) and Blanchard and Quah (1989) approach to recover the structural shocks. Also we analyze corresponding dynamic effects using forecasting error variance decomposition and impulse response function analysis tools. The results show domestic permanent net output shocks such as efficiency policies and domestic temporary net output shocks such as fiscal policies mainly have a role of important on the determinants of current account. Also, the exchange rate uncertainty, oil prices and oil revenues are a sign of the importance of current account after the production-related.