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Examining the Persistence of Real Exchange Rate Misalignment in Iran

Amir Mansoor Tehranchian () and Roozbeh Balounejad Nouri ()
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Amir Mansoor Tehranchian: Associated Professor of Economics, Mazandaran University
Roozbeh Balounejad Nouri: Assistance Professor of Economics, Khatam University

Quarterly Journal of Applied Theories of Economics, 2016, vol. 2, issue 4, pages 1-22

Abstract: Exchange rate, as a measure of a nation's currency against the currencies of other countries indicates the economic condition of the country at international level. Deviation from the equilibrium real exchange rate is due to the creation misalignment. Studies on the exchange rate and its impact on macroeconomic variables indicate that the misalignment or real exchange rate deviation from equilibrium path has a negative impact on macroeconomic variables. In this study, persistence in real exchange rate misalignment during the period 1978-2013 has been studied in Iran. For this reason First Equilibrium real exchange rate equation using Johansen cointegration method was estimated. Then, using the Autoregressive Fractionally Integrated Moving Average model (ARFIMA) and Exact Maximum Likelihood (EML) method persistence of real exchange rate misalignment is determined. Persistence Test results showed that the degree of integration real exchange rate misalignment is equal to 0.42, indicating the persistence of the real exchange rate misalignment in Iran.

Keywords: Persistence of real exchange rate misalignment; Equilibrium real exchange rate; Autoregressive Fractionally Integrated Moving Average model. (search for similar items in EconPapers)
JEL-codes: C13 C32 F13 (search for similar items in EconPapers)
Date: 2016
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