DIFFERENCES IN EXCHANGE RATE EFFECTS ON PRODUCTION GROWTH: THE CASE OF IRANIAN INDUSTRIES

Sajad Ebrahimi, Omid Ghaderi and Saeed Bayat
Additional contact information
Sajad Ebrahimi: Monetary and Banking Research Institute, Iran
Omid Ghaderi: M.A. graduate in economics, Iran
Saeed Bayat: Central Bank of Iran, Iran

Studies in Business and Economics, 2020, vol. 15, issue 3, 16-35

Abstract: There has been a long debate about whether exchange rate depreciation promotes output growth or not. In this context, we use Iran’s foreign exchange market which has had large fluctuations in recent years. Since the exchange rate influence on industries' activity through different mechanisms, we examine the exchange rate effects in the industry level. To do this, the Iranian manufacturing industries data at 4-digit ISIC level are used from 2011 to 2017. The results of GMM dynamic panel data estimations show that the effects of real exchange rate depreciation on average, are positive in the non-crisis periods. But this relationship does not remain valid in a currency crisis conditions. Accordingly, depreciation does not have any positive effects during the currency crisis. Also, estimation results indicate the exchange rate volatility negatively affects industrial production in all periods. Our findings confirm that due to different characteristics of industries, the effects of exchange rate on production vary among them. So, export orientation, access to the preferential rate and higher level of raw material inventory amplify the positive effect of the real depreciation while import dependency and a higher level of final goods inventory fade the effect and turn into negative in some industries.

Keywords: Exchange Rate; Volatility; Production; Export Oriented; import dependency (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://eccsf.ulbsibiu.ro/RePEc/blg/journl/15302ebrahimi.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:blg:journl:v:15:y:2020:i:3:p:16-35

Access Statistics for this article

More articles in Studies in Business and Economics from Lucian Blaga University of Sibiu, Faculty of Economic Sciences Lucian Blaga University of Sibiu, Faculty of Economic Sciences Dumbravii Avenue, No 17, postal code 550324, Sibiu, Romania. Contact information at EDIRC.
Bibliographic data for series maintained by Mihaela Herciu ().