Analyzing the Effect of Trade Openness and Good Governance on the Volatility of Economic Growth in Iran

The first goal of any economy to move on the path of growth and development is to achieve sustainable growth. Hence, countries are working to reduce volatility in economic growth. One of the factors affecting the volatility of economic growth is foreign trade. The effect of this variable on the volatility of economic growth is different in different countries and one of the reasons is the difference in the institutions of countries. The present study seeks to answer the question of how trade openness considering the situation of government institutions has an effect on the volatility of Iran's economic growth. For this purpose, the volatility of economic growth was obtained by calculating the standard deviation of economic growth. The ratio of exports plus imports to GDP as a degree of trade openness, an average of six indicators of good governance including the Voice and Accountability, Political stability, Government Effectiveness , Regulatory Quality , Rule of Law and Control of Corruption as indicators of political governance and the ratio of government debt to GDP were also used as alternative to government economic governance. In order to achieve the research goal for the Iranian economy during the period 1996-2019, the model was estimated by ARDL method. The results showed that during the study period, increasing trade openness and improving good governance has led to a decrease in the volatility of Iran's economic growth. On the other hand, the increase in the government's economic governance has increased the instability of Iran's economic growth.