Investigation Monetary shocks and Trade Balance Puzzle in the Selected Organization of Islamic Conference Member Countries

The trade balance puzzle is one of the subjects which have been concerned for many economists in different countries, this puzzle point to improve in the trade balance in the short run and worse that in the long run in response to devaluate of domestic currency. This study is attempt to investigation trade balances puzzles in Organization of Islamic Conference (OIC) member Countries which have exchange rate market system similar to Iran market. The results from IRFs in three selected countries, Iran, Gambia and Tunisia reveal that trade balances worse in the short run and improve in the long run. In fact the findings haven’t accepted inverse j-curve or trade balance puzzles in three countries. Also the results from variance decomposition reveal that expansionary money shocks have the most effect on trade balances in selected countries.