Investigating the Co- Movement and Causality between Iran and Germany

This study investigates the economic interdependence between Iran and her main historical trade partner, Germany. We want to see whether the business cycles are transferring from Germany to Iran via trade? By using SVAR model we have found that for period of 1990-2006, Germany have had a slight effect on Iran s economy. Iran is the importer of capital and industrial goods from Germany, and the changes in her import conditions would have effect on domestic product and the supply side. However, we have found that the cycles and fluctuations in Iran have mainly been caused by her own domestic conditions. The trade barriers and control have reduced the effect of the fluctuations from Iran s trade partner to move into Iran s economy.