Sources of Real Exchange Rate Fluctuations in Iran | ||
| پژوهشهای اقتصادی ایران | ||
| Article 2, Volume 11, Issue 35, July 2008, Pages 31-50 PDF (238.33 K) | ||
| Authors | ||
| Ebrahim Hadian1; Morteza Khorsandi2 | ||
| 1Assistant Professor,University of Shiraz | ||
| 2MA in Economics | ||
| Abstract | ||
| The main purpose of this paper is to investigate the sources of real exchange rate fluctuations in Iran by decomposing real exchange rate fluctuations into those attributable to real and nominal shocks. Using a structural VAR model along with Impulse-Response Function and Variance Decomposition Method, we find that real demand shocks play a significant role in explaining real exchange fluctuations in the context of the Iranian economy. About 85 percent of these fluctuations come from real demand shocks. Real supply shocks account for about 12 percent of the real exchange rate fluctuations in Iran. The overall result shows that real shocks dominate nominal shocks in real exchange rate fluctuations in Iran at all horizons. | ||
| Keywords | ||
| Real exchange rate fluctuations; Impulse response function; Variance decomposition; SVAR model | ||
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