Estimation of Iran’s sugar import demand function (ARDL approach)

The purpose of this study was to estimate the demand for Iranian sugar imports considering the two countries of Brazil and the United Arab Emirates as the major importers of sugar to Iran. It should be noted that the UAE acts as a re-exporter and is not a sugar producer. Therefore, time series data from 1992-2016 and Auto-Regressive Distributed lag (ARDL) was used. The results of long-term estimates show that 1% increase in GDP increases the demand for sugar imports by 4.73%, and 1% increase in relative prices and exchange rate reduces the demand for sugar imports by 28%. Also, if the Brazilian export rate increases by one unit, the demand for Iranian sugar imports from Brazil would increase by 0.8% unit compared with the UAE. The Error Correction Model (ECM) in the sugar import demand function also shows that the rate of 0.68% deviation of sugar import from its long-term path is corrected by pattern variables in the next period. Finally, policymakers should consider the exchange rate variable as one of the most important factors influencing foreign trade, especially sugar.