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The Impact of Exchange Rate Fluctuations on Economic Activities in Iran (in Persian)

Author

Listed:
  • Tavakoli, Akbar

    (Iran)

  • Sayyah, Mohsen

    (Iran)

Abstract

The main objective of this study is to analyze the effect of exchange rate fluctuation on real output and the components of aggregate demand in Iran. The effect of exchange rate fluctuation -decomposed to expected and unexpected components - is considered beside fiscal and monetary policies. A system of equations¡ including real output¡ consumer expenditures¡ private investment¡ non- oil exports¡ and imports¡ is used in this study. Applying a SUR estimation method for the period of 1960 to 2007¡ the following results from the exchange rate shocks (positive and negative) were observed: The effect of increasing exchange rate (a negative shock) on consumer expenditures and non-oil exports is significant. As a result of exchange rate shock (money devaluation)¡ the level of consumer expenditures rise and the level of non-oil exports decline. As the second result¡ the level of imports shows no response to exchange rate shocks. However¡ the government expenditures have positive effect on imports and its effects is higher than monetary policy. Finally¡ the exchange rate shocks show no effect on real domestic products and private investment. JEL Classification: E3, F31, D51, E22, M21

Suggested Citation

  • Tavakoli, Akbar & Sayyah, Mohsen, 2010. "The Impact of Exchange Rate Fluctuations on Economic Activities in Iran (in Persian)," Journal of Monetary and Banking Research (فصلنامه پژوهش‌های پولی-بانکی), Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 2(4), pages 59-78, September.
    • Handle: RePEc:mbr:jmbres:v:2:y:2010:i:4:p:59-78
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    Citations

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    Cited by:

    1. Mehin Aslani Nia, Nassim & Salmani, Behzad & Fallahi, Firouz & Asgharpour, Hossein, 2020. "The effect of currency crisis on GDP dynamics: PGLS approach," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 7(1), pages 185-210, May.

    More about this item

    Keywords

    Exchange Rate Fluctuation; Real Output; Consumer Expenditures; Private Investment; Non; oil Exports;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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