Mehdi Yazdani; Hassan Dargahi; Roghayeh Akbari Afrouzi
Abstract
In general, the main objective of monetary policies is to stabilize the key macroeconomic variables, especially the inflation around its target. However, the role of some variables such as the real exchange rate can be important in optimal monetary policy responses to commodity terms of trade shocks ...
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In general, the main objective of monetary policies is to stabilize the key macroeconomic variables, especially the inflation around its target. However, the role of some variables such as the real exchange rate can be important in optimal monetary policy responses to commodity terms of trade shocks in commodity dependent emerging market economies, such as oil-exporting countries. This study tries to examine the impacts of different monetary policy in order to minimize the adverse effects of the economic shocks, by considering the real exchange rate gap into the flexible inflation targeting rule, in the Iranian economy. Hence, using a new Keynesian model, the demand and Phillips curves are estimated by autoregressive distributed lags (ARDL) method, based on the quarterly data during 1991:Q1-2014:Q4 and then a loss function for the central bank is minimized subject to above equations, by using the optimal control approach. According to the results, when the real exchange rate gap is calculated based on the lower targets, existence of this variable in the loss function of the monetary authorities lead to lower losses. But the higher real exchange rate gap is accompanied by higher losses. For summary, dependent on the real exchange rate gap, the monetary author can use the target of the exchange rate as a policy target. However, the flexible inflation targeting monetary framework, with regards to real exchange rate targeting, is not optimal policy in case of more rigid exchange rate regimes.
Hamid La'l Khezri; Ali Akbar Naji Meydani; Mostafa Karimzadeh
Volume 19, Issue 59 , July 2014, , Pages 211-236
Abstract
The real exchange rate is considered as a basic indicator in determining the level of international competition that explain the internal situation of the country. Instability in the performance of this Index implies imbalance in the economy. Instability of the real exchange rate will effect total demand ...
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The real exchange rate is considered as a basic indicator in determining the level of international competition that explain the internal situation of the country. Instability in the performance of this Index implies imbalance in the economy. Instability of the real exchange rate will effect total demand of the economy by import and export and will influence overall economy through costs of intermediate and final imported goods. It’s the cause of changes and fluctuations in consumer and wholesale price indices that are calculated as the basis of inflation. The present study investigates the instability of the exchange rate on the private sector's consumption using annual data for the period 1352-1390. In this regard, values of the real exchange rate volatility using the pattern of generalized autoregressive conditional heteroskedasticity (GARCH), and then the impact of the real exchange rate instability on private sector consumption is surveyed by using the method of Autoregressive-Distributed Lag (ARDL). The results of estimations show that in long term, Disposable income, liquidity, real exchange rate and the volatility of the real exchange rate have positive effect and Real interest rates have a negative impact on private sector consumption.
Hossein Mohammadi; Aida Ariabod
Volume 17, Issue 52 , October 2012, , Pages 169-181
Abstract
Exchange regimes at the international level, over many years have several ups and downs and they affect the economic structure of countries. Different exchange regimes show how to determine the exchange rate in the economy. The impact of exchange rate regimes on trade is one of the important issues that ...
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Exchange regimes at the international level, over many years have several ups and downs and they affect the economic structure of countries. Different exchange regimes show how to determine the exchange rate in the economy. The impact of exchange rate regimes on trade is one of the important issues that have been in many applied studies. Devaluation (i.e. increase in Real exchange rate), will cause examined the current account status to worsen and then after a short period, the situation may reverse and the current account state will improve. This change in the current account is called J-shaped curve. For current account in this paper, using a vector error correction model VECM and impulse response functions, Iran and South Korea's trade balance dynamics during the 1996 -2008 period was reviewed using quarterly data and J-shaped curve for current account tested. The results of tests did not confirm the hypothesis of the existence of a J-shaped curve between the trade balance and Real exchange rate over the studied period. The reaction of trade balance to an increase in exchange rate in the long term was found as negative and significant. In connection with the positive impact real income of South Korea on Iran's trade balance, results indicate this coefficient is significant. Also the reaction of trade balance with respect to Iran's real income is negative and significant.
Javid Bahrami; Samira Nasiri
Volume 16, Issue 48 , October 2011, , Pages 25-54
Abstract
Applying the SVAR method of 'Kilian' to the monthly data over the period of 1973-2007, in this paper, we decompose oil price shocks into five structural shocks, namely, Iran political supply shocks, OPEC political supply shocks, non- OPEC supply shocks, world demand shocks, and oil specific demand shocks. ...
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Applying the SVAR method of 'Kilian' to the monthly data over the period of 1973-2007, in this paper, we decompose oil price shocks into five structural shocks, namely, Iran political supply shocks, OPEC political supply shocks, non- OPEC supply shocks, world demand shocks, and oil specific demand shocks. Then, estimating separate OLS regressions, based on annual data of Iranian Economy, the impact of these structural shocks on main macroeconomic variables, and outbreak of Dutch disease is studied. This paper finds that the symptoms of Dutch disease have not been observed, following different structural shocks, except for Iran political supply shocks. Owing to dominant role of government in production, and export of oil in Iran, it is evident that the effect of oil price shocks, to a large extent depends on the government conduct, and the Dutch disease is not an inevitable reality for the Iranian economy.
Mehdi Moradpour; Mohsen Ebrahimi; Vahid Abbasion
Volume 11, Issue 35 , July 2008, , Pages 159-176
Abstract
This paper studies the effect of real exchange rate uncertainty on private investment in Iran. We estimate the effect using a model for private investment in Iran and the time series data for the period 1977-2004. We use the GARCH method to construct an estimate of the real exchange rate uncertainty, ...
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This paper studies the effect of real exchange rate uncertainty on private investment in Iran. We estimate the effect using a model for private investment in Iran and the time series data for the period 1977-2004. We use the GARCH method to construct an estimate of the real exchange rate uncertainty, and estimate the model by OLS method. The results show that the effect of uncertainty of real exchange rate on investment by private sector is significantly negative.
Mostafa Karimzadeh
Volume 8, Issue 26 , April 2006, , Pages 41-54
Abstract
Financial market is one of the most important markets in each economy. Stock exchange has a considerable role in transformation of saving to investment. In major industrial countries, Up and down of the stock exchange not only influence their national economy but also can affect world economy. Theoretically ...
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Financial market is one of the most important markets in each economy. Stock exchange has a considerable role in transformation of saving to investment. In major industrial countries, Up and down of the stock exchange not only influence their national economy but also can affect world economy. Theoretically and practically it is known that there is a firm relation between monetary policy and the behavior of the stock exchange market. Hence, there should be a relation between monetary variables and stock price index. Study of these relationships in Iran’s economy is purpose of this article. Theoritical basis of the model rely upon portfolio and Fisher theories. Monetary variables such as M2, interest rate and foreign exchange rate can explain the fluctuations of stock price index. Long run relation for these variables is focus of our study. We tried to find a cointegration vector between these variables using ARDL approach. Results show that there is a firm and positive long run relation between TEPIX (Stock Price Index) and M2,and there is a negative relation between TEPIX and foreign exchange rate and there is a negative but weak relation between TEPIX and interest rate.
Hoshang Shajari; Komail Tayebi; Seyed Abdolmajid Jalaee
Volume 8, Issue 26 , April 2006, , Pages 153-179
Abstract
In the literature of international economics, determination of exchange rate pass- through has been closefy related to main determinants, and to its impacts on other economic variables. In principle, exchange rate pass-through is defined as a change in exchange rate as a result of a change in prices ...
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In the literature of international economics, determination of exchange rate pass- through has been closefy related to main determinants, and to its impacts on other economic variables. In principle, exchange rate pass-through is defined as a change in exchange rate as a result of a change in prices of imported goods. The pass-through is generally measured based on the responsiveness of the import price index to changes in real exchange rate. In accordance with fluctuations in foreign exchange and the exchange rate, this paper attempts to explore the importance of exchange rate pass-through in the Iranian economy. origenaly, a theoretical discussion of the exchange rate pass-through is reviewed, and then, by using Neuro-Fuzzy Systems its situation in Iran is analyzed. In addition, empirical models of import prices and exchange rate are specified for the Iranian economy to examine the impacts of monetary and foreign exchange policies, as well as the degree of economic opennness on exhang rate pass-through in Iran. The models are also estimated and evaluated by the Neuro-Fuzzy Systems. In general, the results obtained indicate that the conduction of all mentioned policies has significant and positive effects on the pass-through status. In addition, the method used is a more efficient and reliable instrument in forecasting the trends of the exchange rate and the price variables
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.
