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Examining the Persistence of Real Exchange Rate Misalignment in Iran

Author

Listed:
  • Tehranchian, Amir Mansoor

    (Associated Professor of Economics, Mazandaran University)

  • Balounejad Nouri, Roozbeh

    (Assistance Professor of Economics, Khatam University)

Abstract

Exchange rate, as a measure of a nation's currency against the currencies of other countries indicates the economic condition of the country at international level. Deviation from the equilibrium real exchange rate is due to the creation misalignment. Studies on the exchange rate and its impact on macroeconomic variables indicate that the misalignment or real exchange rate deviation from equilibrium path has a negative impact on macroeconomic variables. In this study, persistence in real exchange rate misalignment during the period 1978-2013 has been studied in Iran. For this reason First Equilibrium real exchange rate equation using Johansen cointegration method was estimated. Then, using the Autoregressive Fractionally Integrated Moving Average model (ARFIMA) and Exact Maximum Likelihood (EML) method persistence of real exchange rate misalignment is determined. Persistence Test results showed that the degree of integration real exchange rate misalignment is equal to 0.42, indicating the persistence of the real exchange rate misalignment in Iran.

Suggested Citation

  • Tehranchian, Amir Mansoor & Balounejad Nouri, Roozbeh, 2016. "Examining the Persistence of Real Exchange Rate Misalignment in Iran," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 2(4), pages 1-22, March.
    • Handle: RePEc:ris:qjatoe:0024
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    More about this item

    Keywords

    Persistence of real exchange rate misalignment; Equilibrium real exchange rate; Autoregressive Fractionally Integrated Moving Average model.;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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