Hossein Bastanzad; Pedram Davodi
Abstract
Real exchange rate deviations should be consistent with behavior of fundamental indicators including terms of trade, openness, government size, the ratio of domestic to trading partners’ productivity, and net foreign direct investment. The aim of this paper is to study the response of exchange ...
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Real exchange rate deviations should be consistent with behavior of fundamental indicators including terms of trade, openness, government size, the ratio of domestic to trading partners’ productivity, and net foreign direct investment. The aim of this paper is to study the response of exchange rate to structural variables and its consistency with economics theory.Our estimation of a vector auto regression (VAR) model which relied on seasonal data during 1990-2015 underscores that real exchange rate (RER) is significantly depreciated with regard to the long run trend, while simultaneously and in contrast with theoretical basis, non-oil trade deficit widened, government size increased, and terms of trade improved due to higher international oil price. The accelerating gap between actual and long run trend of RER augments the unsustainability of balance of payments and foreign exchange market vulnerability against probable shocks. Foreign exchange forward market is constructed in practice to monitor demand composition in general and the share of speculative transaction in particular to increase information capacity of policy-makers to achieve the goal of financial stability and external sustainability in one hand as well as evaluating the Central Bank intervention capability on the other hand.
Mostafa Mobini Dehkordi; Teymour Mohammadi
Volume 14, Issue 55 , January 2015, , Pages 41-70
Abstract
In recent years, researchers have been increasingly noticed economic growth and its determinants. Exchange rate and its volatility are important factors in determining a country's economic growth. Various studies in this regard have shown contradictory results concerning the effects of exchange ...
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In recent years, researchers have been increasingly noticed economic growth and its determinants. Exchange rate and its volatility are important factors in determining a country's economic growth. Various studies in this regard have shown contradictory results concerning the effects of exchange rate volitality on economic growth. The purpose of this study, Considering the importance of this issue, is to evaluate the nonlinear effects of real exchange rate uncertainty on economic growth (oil and non-oil) from 1369/1 to 90/4. In this study, economic growth is a function of real exchange rate uncertainty, investment rate, active population growth and growth rate of human capital. To estimate the amounts of real exchange rate uncertainty, GARCH In Mean model is used. With the implementation of a program in eviews, a certain level of exchange rate volatility was calculated using criteria of standard deviation minimum. Then, GMM model is used to determine the effects of this volatility on economic growth. The results show that the real exchange rate uncertainty up to a certain level, which is investigated in this research, has a negative effect on economic growth, whether oil or non-oil.
Leila Torki; Seyed Komail Tayebi; Mehdi Yazdani; Elham Fathi
Volume 14, Issue 53 , July 2014, , Pages 167-196
Abstract
An appropriate solution to resolve trade deficit is national currency devaluation. This policy is, at least in the long term, useful. It is based on the logic that any devaluation of national currency in the form of market mechanism reduces the trade deficit. On the other hand the trade balance of countries ...
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An appropriate solution to resolve trade deficit is national currency devaluation. This policy is, at least in the long term, useful. It is based on the logic that any devaluation of national currency in the form of market mechanism reduces the trade deficit. On the other hand the trade balance of countries are affected by several factors including the international financial conditions that change the volume of international transactions and in this way affect the economy as a whole and trade balance in particular. The purpose of this paper is to study the factors affecting trade balance between Iran and her ten trading partners with considerations of the financial crisis index as a symbol of the international financial conditions. For this purpose, a time series is specified and then estimated by ARDL and error correction model (ECM) for the period of 1981-2009. Also the effects of the financial crisis on trade balance using Impulse Response Functions are considered. The results show that J curve is only confirmed for the bilateral trade of Iran with China and Italy and for the other countries, with consideration of the financial crisis, this hypothesis is rejected. It should be noted that all coefficients are stable with respect to the CUSUM and CUSUMQ tests.
