Identification of Effective Factors on Real Exchange Rate Misalignment and Its Impact on Economic Growth in Iran

Asgari, Manoochehr; Tofighi, Hamid

Document Type : Research Paper

Authors

Abstract

The purpose of this survey is to determine of equilibrium real exchange rate, misalignment and impact of misalignment of real exchange rate on economic growth. According to introducing of new exchange rate literature on 80 decade and econometrics models in recent decades, the model that introduce here is the fundamental Edwards model that adjusted for IRAN. The variables of this survey for determining of real exchange rate are: government expenditure, the ratio of capital investment to GNP, capital account, the ratio of oil and gas revenue to GNP, the excess of money supply to money demand, the difference between parallel and official market exchange rate. The period of this survey is from 1959-2004 Iranian calendars. In this regard we use Johanson test in order to estimate long-run equilibrium real exchange rate and use vector error correction model in order to achieve short time relations and loading factors. After calculating real exchange rate from long-run estimated equation, misalignment could
be calculated from the difference between real exchange rate and estimated equilibrium real exchange rate. As in most years in Iran exchange rates overvalued, when we calculate misalignment and use it for estimating economic growth model, the sign of misalignment was negative and therefore had negative impact on economic growth.

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Economics Research

Identification of Effective Factors on Real Exchange Rate Misalignment and Its Impact on Economic Growth in Iran

References

References

Volume 9, Issue 33 - Serial Number 2
July 2009
Pages 223-246

Identification of Effective Factors on Real Exchange Rate Misalignment and Its Impact on Economic Growth in Iran

References

References

Volume 9, Issue 33 - Serial Number 2July 2009Pages 223-246

Volume 9, Issue 33 - Serial Number 2
July 2009
Pages 223-246