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.
Masood Nonejad; Mahdi Roshan Ghiyas
Volume 12, Issue 46 , October 2012, , Pages 183-200
Abstract
Terms of trade is one of the important and effective variables in the economy of all countries, and especially in the developing countries. Terms of trade shows the purchasing power of exports of a country. Therefore, the study of terms of trade and its volatility is very important in the economy of ...
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Terms of trade is one of the important and effective variables in the economy of all countries, and especially in the developing countries. Terms of trade shows the purchasing power of exports of a country. Therefore, the study of terms of trade and its volatility is very important in the economy of a country. In this study, by using the method of Autoregressive Distributed Lag (ARDL) and the data for years of 1975-2009, the effect of terms of trade, its volatility and components on the economic growth of Iran has been estimated. The volatility of terms of trade has been estimated using the method of Autoregressive Conditional Heteroscedasticity. The results of this study show that the effect of terms of trade on economic growth in Iran is positive and significant, but its volatility has negative and significant effect. Also, the results show that export real price index has positive and significant effect, but import real price index and export real price index volatility have negative and significant effect on the economic growth in Iran.
Mostafa Karimzadeh; Khadijeh Nasrollahi; Saeed Samadi; Rahim Dallai Esfahani
Volume 11, Issue 41 , July 2011, , Pages 31-50
Abstract
The main idea of this study is examination of the Impact of Terms of Trade on
Investment by Johnsen-Juselius cointegration technique for Economy of Iran in
(1971-2006). For this aim, we specify investment function according the present
value criteria and neoclassic theory. Our model includes gross ...
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The main idea of this study is examination of the Impact of Terms of Trade on
Investment by Johnsen-Juselius cointegration technique for Economy of Iran in
(1971-2006). For this aim, we specify investment function according the present
value criteria and neoclassic theory. Our model includes gross domestic production,
price index, interest rate and terms of trade.
We use Johnsen-Juselius cointegration technique for estimation of this model.
The result of econometric estimation has indicated a long run relationship among
investment, gross domestic production, price index, interest rate and terms of trade.
Our result showed GDP, price index and terms of trade have direct effect and
interest rate has inverse effect on investment.
