Investigation of exchange rate fluctuations on economic indicators and its management mechanism

Document Type : Original Article

Author

Master of Rural Development, Credit Expert of Management of Bank keshavarzi of Hamadan Province

Abstract

Exchange rate fluctuations are of particular importance in macroeconomic issues due to their impact on other economic variables. Agriculture, oil, industry and services are the most important variables that are affected by currency fluctuations. Given that there have been several fluctuations in exchange rates in Iran over the past three decades, it is important to study the effect of exchange rate fluctuations on economic indicators. The purpose of this study is to investigate the effect of exchange rate fluctuations on Iran 's economic indicators. For this purpose, using annual data during the period 1991 to 2016 and using the VAR vector error correction model, the relationships between variables were examined. Therefore, in this study, the effect of real exchange rates on macroeconomic variables of the country was investigated. The results of the study indicate that the value added of the oil sector has the greatest impact on the real exchange rate. In addition, the results of the impulses of the immediate reaction and standard deviation show that if we enter a shock from the exchange rate, the oil sector variable will see the greatest effect of this shock.

Keywords

Main Subjects


Aghaei, K., Jabbari, A., & Karimi, M. (2008). Investigating the sources of macroeconomic fluctuations with emphasis on the real exchange rate during the years 1970-2005; Quarterly Journal of Economic Research, 8(2), 41-61. (in Persian).
Akonji Danmola, R. (2013). The Impact of Exchange Rate Volatility on the Macroeconomic Variables in Negeria. European scientific journal, 9(7), 152-165.
Asseery, A., & Peel, D. A. (1991). The effects of exchange rate volatility on exports: Some new estimates. Economics Letters, 37(2), 173-177.
Baghzian, A. (1998). Investigating the Relationship between Non-Oil Export Growth and Economic Growth. PhD Thesis, Shahid Beheshti University of Tehran. Faculty of Economics and Political Science. (in Persian).
Bernanke, B., & Gertler, M. (1989). Agency costs, net worth, and business fluctuations. The American Economic Review, 14-31.
Bleakey, H., & Cowan, K. (2005). Corporate dollar debt and devaluations: much ado about nothing? Working Paper, Inter-American Development Bank, Research Department, No. 532.
Broll, U., & Eckwert, B. (1999). Exchange rate volatility and international trade. Southern Economic Journal, 178-185.
Broto, C., & Berganza, J. C. (2011). Flexible Inflation Targets, Forex Interventions and Exchange Rate Volatility in Emerging Countries. Banco DE-Espana, Eurosistema, 1105.
Central Bank balance sheets 1961-2002 and economic indicators 2002, 2003, 2004. (in Persian).
Chen, L. (2009). The Effect of China's RMB Exchange Rate Movement on Its Agricultural Export:  A  Case  Study  of  Export  to  Japan.  International  Association  of  Agricultural Economists Conference. Beijing. China. 16-22.
Cot, A. (1994). Exchange Rate Volatility and Trade: A Survey. Working Paper, 5-94, Bank of Canada.
Court of Audit Research Network. (2013). Analytical exchange rate report. (www.Pazhoohesh.dmk.ir). (in Persian).
Doroodian, K. (1999). Does exchange rate volatility deter international trade in developing countries. Journal of Asian Economics, 10(3), 465-474.
Eichengreen, B. (2007). The real exchange rate and economic growth. Social and Economic Studies, 7-20.
Faraji, Y. (2010). Money, Currency and Banking. Tehran: Commercial Publishing Company, 14th edition. (in Persian).
Faroog, M., & Javed, Z. H. (2009). Economic Growth and Exchange Rate Volatility in Case of Pakistan. Journal of Life and Social Sciences, l7(2), 112-118.
Greenaway, D., & Kneller, R. (2007). Firm heterogeneity, exporting and foreign direct investment. The Economic Journal, 117(517).
Gueria, J., & Revil, L. (2002). Exchange Rate Volatility and Growth in university of Amiens.
Hooper, P., & Kohlhagen, S. W. (1978). The effect of exchange rate uncertainty on the prices and volume of international trade. Journal of international Economics, 8(4), 483-511.
Jaramillo-Villanueva, J. L., & Sarker, R. (2009). Exchange Rate Sensitivity of Fresh Tomatoes Imports from Mexico to the United States. International Association of Agricultural Economists Conference, Beijing, China.
Kandil, M. (2000). The Asymmetric effects of Exchange Rate Fluctuations. Theory and Evidence from Developing Countries. IMF working paper, 184 pp.
Komot, G., & Thorbecke, W. (2010). Investigating the Effect of Exchange Rate Changes on Transpacific Rebalancing. Asian Development Bank Institute Working Paper Series.
Korinek, J., & Huchet Bourdon, M. (2011). To What Extent Do Exchange Rates and Their Volatility Affect Trade? OECD Trade Policy Papers,119.
Liang, S. H. I. (2016). Research on the Impact of the Fluctuation of RMB Exchange Rate on China’s Import and Export Trade. DEStech Transactions on Social Science, Education and Human Science, (icss).
Mensah, L., Bokpin, G. A., & Dei Fosu-Hene, E. (2017). Foreign exchange rate moments and FDI in Ghana. Journal of Economics and Finance, 41(1), 136- 152.
Mishkin, F. (1999). Money, Currency and Banking, translated by Ali Jahankhani and Ali Parsayan. 201. (in Persian).
Mousavi Mohseni, R., & Sobhanipour, M. (2008). Study of exchange rate passage in Iran's economy. Economic Research Journal, Special Issue of Economic Adjustment Plan. No. 4: 129-149. (in Persian).
Obstfeld, M., & Roggoff, K. (1998). Risk and Exchange Rates, NBER Working Paper, 6694.
Parhizkar, H. R. (2009). Investigating the impact of the country's rubber industry on foreign exchange policies; By order of Tire Industry Association, Tehran. (in Persian).
Rajmund, M. (2012). Macroeconomic Aspect of Real Exchange Rate Volatility in the Central European Countries. Munich Personal Repec Archive, 40910.
Ramos, R. A. (2012). Intersections between exchange rate and inflation plocies in IMF Recommendations. The International Policy Center for Inclusive Growth, UNDP and the Government of Brazil.
Rashid, A., & Waqar, S. M. (2017). Exchange rate fluctuations, firm size, and export behavior: an empirical investigation. Small Business Economics, 1-17.
Samsami, H. (1999). Study and compilation of exchange rate determination model, PhD thesis, Faculty of Economics and Political Science, Shahid Beheshti University. (in Persian).
Schnabl, G. (2009). Exchange rate volatility and growth in emerging Europe and East Asia. Open Economies Review, 20(4), 565-587.
Seyed Hashemi Puroldi, M. (2010). The effects of exchange rate uncertainty on investment in Iran. Application of Bounds test approach in collective, Master Thesis, Faculty of Economics and Management, Urmia University. (in Persian).
Stanners, W. (1993). Is Low Inflation an Important Condition for High Growth? Cambridge Journal of Economics, Oxford University Press, 17(1), 79-107.
Sun, C., Kim, M., Koo, W., Cho, G., & Jin, H. (2002). The Effect of Exchange Rate volatility on wheat Trade Wordwide. Working Paper. Center for Agricultural Policy and Trade studies.
Wang, K. L., & Barrett, C. (2007). Estimating the Effects of Exchange Rate Volatility on Export Volumes. Journal of Agricultural and Resource Economics, 2, 225-255.
Zamanzadeh, H. (2011). Exchange rate management in the Iranian economy. Journal of Economic News, 8(130), 41-48. (in Persian).