Monetary Fundamental-Based Exchange Rate Model in Iran: Applying a MS-TVTP Approach

Ebrahim Hadian; () and Najmeh Sajedianfard ()
Additional contact information
Ebrahim Hadian;: Department of Economics, Shiraz University, Shiraz, Iran.
Najmeh Sajedianfard: Department of Economics, Shiraz University, Shiraz, Iran.

Iranian Economic Review (IER), 2018, vol. 22, issue 2, 557-578

Abstract: The main purpose of this article is to analyze exchange rate behavior based on monetary fundamentals in the context of Iranian economy over the period 1990:2 to 2014:3. To do so, two monetary exchange rate models is investigated, the first by regarding interest rate differential as a monetary variable, and the second one regardless of interest rate differential as a monetary variable. Also, in both cases, effective factors on exchange rate regime shifting are examined in Time-Varying Transition Probabilities Markov Switching Model (TVTP MSM). The main results indicate that interest rate differential model is not suitable to explain exchange rate behavior in Iran. Furthermore, Markov Switching Time-Varying Transition Probabilities model in comparison with Markov Switching Fixed Transition Probabilities has a better performance in analyzing exchange rate behavior. In addition, changes in real oil price are a main determiner of probability of regime switching.

Keywords: Exchange Rate Behavior; Monetary Fundamentals; Markov Switching Model; Iran Economy. (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
ftp://80.66.179.253/eut/journl/20182-9.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:eut:journl:v:22:y:2018:i:2:p:557

Access Statistics for this article

Iranian Economic Review (IER) is currently edited by Dr.Hossien Abbasinejad

More articles in Iranian Economic Review (IER) from Faculty of Economics,University of Tehran.Tehran,Iran Contact information at EDIRC.
Bibliographic data for series maintained by [z.rahimalipour] ().