Exchange Rate Unification, the Equilibrium Real Exchange Rate, and Choice of Exchange Rate Regime: The Case of the Islamic Republic of Iran

International Monetary Fund

No 1999/015, IMF Working Papers from International Monetary Fund

Abstract: This paper reviews recent developments in the exchange system in the Islamic Republic of Iran and in the real effective exchange rate (REER). It also considers the determinants of the REER in connection with the choice of exchange regime after unification. The study illustrates how economic policy variables and exogenous shocks affect the real exchange rate primarily through the fiscal balance, and consequently, the savings-investment gap. It further illustrates that the appropriate level of REER and its medium-term path depend upon the mix of monetary, fiscal, and structural policies that underpin the evolution of inflation, balance of payments, and productivity growth.

Keywords: WP; nominal exchange rate; current account; floating exchange rate; terms of trade; U.S. dollar; Exchange rate unification; equilibrium exchange rate; exchange rate regime; Islamic Republic of Iran; REER calculation; export rate; excess demand; debt service; rate of return; trading partner; exchange rate development; term exchange rate regime; exchange rate system; market rate; Exchange rates; Real exchange rates; Exchange rate arrangements; Real effective exchange rates (search for similar items in EconPapers)
Pages: 41
Date: 1999-01-01
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Citations: View citations in EconPapers (8)

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