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Trade openness, political institutions, and military spending (evidence from lifting Iran’s sanctions)

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  • Sajjad Faraji Dizaji

    (Tarbiat Modares University)

Abstract

Under the recent nuclear deal on Iran’s nuclear program, many of the most punishing sanctions are poised to be lifted. This study examines how trade openness (due to lifting the sanctions against trade) could affect the political institutions and military expenditure in Iran based on the available dataset for the period of 1960–2011. Using impulse response functions (IRF) and a variance decomposition analysis (VDC) on the basis of a vector autoregressive (VAR) model, the results imply that the response of political institutions to an improvement in international trade is negative and statistically significant, whereas that of military spending is positive and significant. Moreover, the shocks to trade openness influences military spending more than non-military spending over the all years after the initial shocks. These results are robust to other indicators of political institutions, different orderings of variables in the VAR and alternative specifications of trade, and government revenues and expenditures.

Suggested Citation

  • Sajjad Faraji Dizaji, 2019. "Trade openness, political institutions, and military spending (evidence from lifting Iran’s sanctions)," Empirical Economics, Springer, vol. 57(6), pages 2013-2041, December.
    • Handle: RePEc:spr:empeco:v:57:y:2019:i:6:d:10.1007_s00181-018-1528-2
    DOI: 10.1007/s00181-018-1528-2
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    Cited by:

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    3. Rafał Woźniak & Jacek Lewkowicz, 2023. "Can We Have More Butter and Guns Simultaneously? An Endogeneity Perspective," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 2, pages 28-46.
    4. Iman Cheratian & Saleh Goltabar & Mohammad Reza Farzanegan, 2022. "Survival Strategies under Sanctions: Firm-Level Evidence from Iran," CESifo Working Paper Series 9568, CESifo.
    5. Fathin Faizah Said & Raja Solan Somasuntharam & Mohd Ridzwan Yaakub & Tamat Sarmidi, 2023. "Impact of Google searches and social media on digital assets’ volatility," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-17, December.
    6. Faraji Dizaji, Sajjad & Ghadamgahi, Zeinab Sadat, 2021. "The impact of smart and non-smart sanctions on government health expenditures: evidence from developing resource-based countries," MPRA Paper 108787, University Library of Munich, Germany.

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    More about this item

    Keywords

    Political institutions; Military spending; Sanctions; Iran; VAR modeling;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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