ESTIMATING OF EQUILIBRIUM REAL EXCHANGE RATE IN IRAN'S ECONOMY

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MEHRARA M.

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Journal: ECONOMIC RESEARCH REVIEW Year:2006 | Volume:6 | Issue:2 (21) Page(s): 167-208

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Title

ESTIMATING OF EQUILIBRIUM REAL EXCHANGE RATE IN IRAN'S ECONOMY

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MEHRARA M. | Issue Writer Certificate

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Abstract

Estimating the degree of exchange rate misalignment remains one of the most challenging empirical problems in open economy. We use an econometric methodology for estimating the equilibrium real exchange rate for imports and exports, using annual data during 1989-2002 for Iran. The results indicate that the real exchange rate (RER) in Iran is not stationary, implying that the behavior of the real exchange rate is not related to PPP. So, the hypothesis of PPP, as recognized in the fourth development plan (1989-2002), can therefore be misleading to predict any over- and undervaluation of the exchange rate. According to our estimates, the RER for imports was overvalued by 32 percent on average between 1368-1381, while the overvaluation of RER for exports was much less (amounting to nearly 23 percent on average). Similarly, the coefficient of the error correction term for RER for exports is much more than the corresponding estimate for RER for imports( -0.35 versus -0.19 respectively), implying the higher speed of adjustment of the export rate, compared to import rate, to its equilibrium level.

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APA: Copy

MEHRARA, M.. (2006). ESTIMATING OF EQUILIBRIUM REAL EXCHANGE RATE IN IRAN'S ECONOMY. ECONOMIC RESEARCH REVIEW, 6(2 (21)), 167-208. SID. https://sid.ir/paper/67018/en

Vancouver: Copy

MEHRARA M.. ESTIMATING OF EQUILIBRIUM REAL EXCHANGE RATE IN IRAN'S ECONOMY. ECONOMIC RESEARCH REVIEW[Internet]. 2006;6(2 (21)):167-208. Available from: https://sid.ir/paper/67018/en

IEEE: Copy

M. MEHRARA, “ESTIMATING OF EQUILIBRIUM REAL EXCHANGE RATE IN IRAN'S ECONOMY,” ECONOMIC RESEARCH REVIEW, vol. 6, no. 2 (21), pp. 167–208, 2006, [Online]. Available: https://sid.ir/paper/67018/en

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