The Effect of Exchange Rae Fluctuations on the Value Added of Industrial Sector: By Use of Cottani’s Model

Fluctuation of exchange rate and its deviation from equilibrium path are one of the most important macroeconomic variables that is affected by different side of economical sectors. Whereas, the Exchange rate fluctuation and its deviation from equilibrium path haven’t the same and similar effects on all of the economical sectors, and considering eminent important of industrial development on the development of the country; This paper examines and evaluates the exchange rate fluctuation and its deviation from equilibrium path on value added of industrial sectors. So first we calculate deviation of real exchange rate from long run equilibrium path by use of Cottani’s model
Then, in order to calculate short run exchange rate with error correction method framework .In order to avoid non stationery of some of the variables used in these models, and other problems, we have used a new econometric method; integration and auto regressive distribution lag (ARDL); and then considered the effects of exchange rate fluctuations and its deviation from equilibrium path on value added of industrial sectors This paper shows that fundamental hypothesis; posterior reverse relationship between real exchange rate deviation of equilibrium path and value added of industrial sectors; is accepted.
JEL Classification: D51