Journal of Economic Research (Tahghighat- E- Eghtesadi)

Journal of Economic Research (Tahghighat- E- Eghtesadi)

Multidimensional Analysis of the Exchange Rate and Its Uncertainty in the Dynamics of Iran's Economic Growth

Document Type : Research Paper

Authors
Akbar Hassanzadeh 1
Hassan Heidari 2
kiumars shahbazi 2
S. Jamaledin Mohseni Zonouzi 3
1 PhD Student, Faculty of Economics and Management, Urmia University
2 Professor, Department of Economics, Faculty of Economics and Management, Urmia University
3 Associate professor of Economics, Faculty of Economics & Management, Urmia
10.22059/jte.2021.317222.1008419
Abstract
The exchange rate and its volatility are one of the most important parameters affecting the Iranian economy and have caused a shaky situation in the country in recent years. This study examines the impact of exchange rate and its uncertainty on Iran's economic growth process along with the control variables of oil price growth, inflation and its uncertainty, and liquidity growth using seasonal data from 1991-2018 and applying linear VAR and multi-regime nonlinear MRS and MRS-GARCH models. The results indicate that different results are obtained depending on the type of regime and econometric model. All multi-regime models showed that Iran's growth trend had different regimes, alternating between low and high regimes and often being in a low growth regime. The exchange rate growth and its uncertainty had a significant negative impact on growth in both the linear and nonlinear models. Due to the chaotic evolution of the exchange rate, nonlinear models provide more realistic results according to Iran's economic situation. Control variables also have different effects on economic growth depending on the type of equation and econometric model. Policy makers are recommended to avoid applying cross-cutting measures to solve Iran's daily problems, which create an uncertain environment for economic agents, and to take measures to reduce the negative consequences of the exchange rate and its uncertainty by stabilizing the macroeconomy and unifying the exchange rate.
JEL Classification: C32, C58, F31, O47.
Keywords
Exchange Rate
Economic Growth
Single Regime Models
Multi-Regime Models
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  • Receive Date 13 January 2021
  • Revise Date 16 November 2021
  • Accept Date 07 November 2021