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History of the Rial and Foreign Exchange Policy in Iran

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  • Mohsen Bahmani-Oskooee

    (Valuable comments of Dr. Hadi Mahdavian of the Central Bank of Iran are greatly appreciated. Any error, however, is my own responsibility. Wilmeth Professor of Economics and Director of the Center for Research on International Economics The University of Wisconsin-Milwaukee)

Abstract

Through the history and since 1933, the Iranian rial has declined from 11.2 rials per dollar to almost 8600 rials per dollar today in the parallel or black market. At the same time the official rate has been kept at artificial level most of the time, not consistent with other macro conditions of the country. Historically, however, the Central bank has adjusted the official rate and brought it in-line with the black market rate. This paper not only reviews the historical developments surrounding Iranian rial, but also provides an event study supporting the literature that any foreign exchange control has only short-run impact on the official exchange rate. In the long-run, the official rate must be adjusted toward the black market rate, as evidenced by the behavior of the Central Bank of Iran

Suggested Citation

  • Mohsen Bahmani-Oskooee, 2005. "History of the Rial and Foreign Exchange Policy in Iran," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 10(2), pages 1-20, fall.
    • Handle: RePEc:eut:journl:v:10:y:2005:i:2:p:1
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    References listed on IDEAS

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    1. Bahmani-Oskooee, Mohsen & Miteza, Ilir & Nasir, A. B. M., 2002. "The long-run relation between black market and official exchange rates: evidence from panel cointegration," Economics Letters, Elsevier, vol. 76(3), pages 397-404, August.
    2. William Adams Brown, Jr., 1940. "The International Gold Standard Reinterpreted, 1914-1934," NBER Books, National Bureau of Economic Research, Inc, number brow40-1.
    3. Mohsen Bahmani-Oskooee, 1996. "Source of Stagflation in an Oil-Producing Country: Evidence from Iran," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 18(4), pages 609-620, July.
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    Cited by:

    1. Mohsen Bahmani-Oskooee & Sahar Bahmani, 2015. "Nonlinear ARDL Approach and the Demand for Money in Iran," Economics Bulletin, AccessEcon, vol. 35(1), pages 381-391.
    2. Abbas Valadkhani & Majid Nameni, 2011. "How can Iran's black market exchange rate be managed?," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 38(2), pages 186-202, May.

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