Time-Series Estimation of Imoport Demand Function of Iran: A Renewed Analysis

The empirical investigation of the import demand function has been
one of the most popular topics of research in international economics.
Traditionally, the relative prices and real income are the most dignficant
determinants of the function. This seems questionable on the following
rate of inflation. In a recent economic reform plan called the
"Rihabililation of the Economy", however, the latter is considered as the
appropriate exchange regime.
The present paper probes that how, and to what extend, compliance
with this exchange regime; i.e. "Real Exchange Rate Targeting" would help
achieve economic stability. Using macroeconomic model the issue under
goes mathematical procedures of analysis and the results in a general
implication that the said regime will not yield economic stability because
of conutry's peculiar status of smaller trade sector compared to non-trade
sector. Numerical simulation depicts that economic stability under such an
exchange regime may be achievable only if the trade sector ofthe economy
enjoys a later portion