Nonlinear Dynamic Analysis of Oil Price Fluctuations and Trade Balance Using the NARDL Model

Document Type : Original Article

Author

Assistant Professor of Economics, Department of Humanities, Bozorgmehr University of Qaenat, Qaen,, Iran

10.48308/jem.2026.243154.2037

Abstract

Oil prices have long been recognized as a critical determinant of economic performance and stability, and they affect a wide range of macroeconomic variables. Among these variables, the trade balance is of particular importance because it plays a fundamental role in reflecting a country's international economic position. Oil price fluctuations can also lead to significant disruptions in countries' trade balances and have profound implications for their economic policies. Therefore, the aim of this study is to examine the asymmetric effects of oil price fluctuations on Iran's trade balance during the period 1984-2024 using a nonlinear autoregressive distributed lag (NARDL) model. The results of this study show that, in the short run, a one percent increase and decrease in oil price fluctuations leads to a 1.4743 percent increase and a 1.0905 percent decrease in the trade balance, respectively. In addition, the exchange rate and the output gap have a positive effect on the trade balance with a 99% confidence level. The results of the long-term estimation indicate that the exchange rate and the output gap have a positive and significant effect on the trade balance. Also, the coefficients of positive and negative oil price shocks indicate that the trade balance decreases by 1.5979 and 1.6496 percent, respectively. Finally, the results of the Wald test show that the effects of positive and negative oil price shocks on the trade balance are symmetric in the long run, but this effect is asymmetric in the short run.

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