The Decline of the Iranian Rial During the Post Revolutionary Period: A Productivity Approach
Mohsen Bahmani-Oskooee ()
No 9615, Working Papers from Economic Research Forum
Since the advent of revolution in Iran, the Iranian rial has lost its nominal and real values by more than 40 times. What could explain this decline? In this paper, I identify the decline in relative productivity between Iran and her seven major trading partners as the major cause of the decline in the real rial. Engle-Granger cointegration and error-correction modeling along with Johansen-Juselius cointegration technique are used to establish the long-run relation between real exchange rates (seven) and differential productivity. Additionally, the empirical methodologies are supplemented with a graphic exposition to add more intuition to the analysis. Finally, several policy recommendations are outlined.
Date: 1996, Revised 1996
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Persistent link: https://EconPapers.repec.org/RePEc:erg:wpaper:9615
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