Ahmad Mojtahed.; Azam Ahmadyan
Volume 9, Issue 30 , April 2007, , Pages 1-21
Abstract
The main purpose of this paper is to examine an appropriate exchange rate policy in Iran . Most of the studies have suggested a flexible exchange rate policy with a coordination between monetary and exchange rate policies for the Iranian economy. In this paper, we test the hypothesis that the managed ...
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The main purpose of this paper is to examine an appropriate exchange rate policy in Iran . Most of the studies have suggested a flexible exchange rate policy with a coordination between monetary and exchange rate policies for the Iranian economy. In this paper, we test the hypothesis that the managed exchange rate policy is the most appropriate policy for Iran using the Mundell-Fleming model, and 2SLS method for period 1974-2004.
The estimated macroeconometric model is used to simulate the reaction of five exchange rates regimes to fluctuations of net asset from abroad in the banking system.
The results reveal that the managed exchange policy would yield more stable prices, imports, welfare and money stock .In contrast, a quasi-floating exchange rate policy in which the exchange rate is determined by the percentage of trade balance deviations, will result in the worst kind of volatility in prices, imports, welfare and money stock.
Kazem Yavari; Hossein Ghaderi
Volume 6, Issue 18 , April 2004, , Pages 111-140
Abstract
The purpose of this paper is to find out simultaneously the determinants of the parallel market premium, real exchange rate and price level by using a macroeconomic model. Using the 3SLS regression technique, the paper shows that money, expected inflation rate, net return of foreign exchange, investment, ...
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The purpose of this paper is to find out simultaneously the determinants of the parallel market premium, real exchange rate and price level by using a macroeconomic model. Using the 3SLS regression technique, the paper shows that money, expected inflation rate, net return of foreign exchange, investment, public budget and oil revenues have significant effects on the parallel market premium, real exchange rate and price level. Our simulation results show that devaluation of domestic currency raises prices. It also lowers the premium in the short run but not it the long run. The nominal devaluation leads to real devaluation in the first year but will cause the real exchange rate to be overvalued at the end. This policy will also lower output and raise domestic currency denominated oil revenues and official foreign reserves. An important implication of the empirical results of the paper is that government has to maintain discipline in fiscal and monetary policy to be able to stabilize the parallel market premium, real exchange rate and prices.