Faslnāmah-i Pizhūhish/Nāmah-i Iqtisādī (Sep 2006)

Estimating the Behavior of the Real Exchange Rate in Iran

  • Abdolmajid Jalaie,
  • Hamid Reza Horri,
  • Fatemeh Irani Kermani

Journal volume & issue
Vol. 6, no. 22
pp. 229 – 255

Abstract

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How the real exchange rate behavior is affected by macroeconomic variables within a country is important. Accordingly, this paper has tried, to explain the behavior of it, and to estimate RER for Iran in period of 1959 to 2004. Estimation of the model has been done through VAR and VECM. Estimation of the model showed that Monetary Policy and the degree of economic openness have had a negative impact on the real exchange rate in the short run, but in the long run their impact have turned to be positive. Also, Exchange Policy, which is the indicator of the exchange system in any country, has had a negative impact on the RER in the short run, but in the long run the impact of controls on the exchange system has been positive on RER.