How do Real Exchange Rate Movements Affect the Economic Growth in Iran?

Zarei, Samira (2019): How do Real Exchange Rate Movements Affect the Economic Growth in Iran?

Abstract

This paper, through an asymmetric and non-linear framework, NARDL Model, investigates how real exchange rate movements affect the economic growth of Iran. In other words, whether the movements in the real exchange rate is an indicator of economic growth changes. Working on the monthly data of Gross Domestic Production (GDP) and Real Exchange Rate indexes from November 2009 to November 2019, this study shows asymmetric and negative relationships between exchange rate and economic growth both in the long run and short run. Although, in the long run, the magnitude of effects both positive and negative components of exchange rate on economic growth were significantly more than those of short run, the stability of the results have indicated that the roots of existing nonlinear and asymmetric relationships among these variables are so strong that change in time horizon, from the short run to long run, has also not been able to change them.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic Growth, Exchange Rate, NARDL, Nonlinear and Asymmetric Relationships
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O24 - Trade Policy ; Factor Movement Policy ; Foreign Exchange Policy

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