Imports Under a Foreign Exchange Constraint: The Case of the Islamic Republic of IranWP/95/97-EA Imports Under a Foreign Exchange Constraint: The Case of the Islamic Republic of Iran by Adnan Mazarei This paper is an empirical study of the determination of imports under a regime of foreign exchange rationing. Several previous studies have suggested that the inadequacy of foreign exchange reserves induces many developing countries to compress imports through a system of import licensing and official foreign exchange allocation. In addition to the usual variables, such as relative prices and income, the availability of foreign exchange is a key determinant of the level of imports in these countries. In the case of oil exporting countries, such a relationship should be particularly close, given that sizable portions of both foreign exchange receipts and national income are determined by petroleum exports. This paper provides an empirical examination of the relationship between foreign exchange receipts and imports for the Islamic Republic of Iran during 1961/62-1992/93. The results verify the key role played by petroleum export earnings in the determination of Iran's imports. This paper also explores some of the consequences of the very significant dependence of Iran's imports on foreign exchange receipts. |