Exchange Rate, Inflation and Production Valve in Iranian Political Economy: Based on Structural Vector Regression (SVAR) Model

Document Type : Original Article

Authors

Department of Economics, Qazvin Branch, Islamic Azad University, Qazvin, Iran.

Abstract

Macro-monetary and financial variables are among the factors that can affect the country's economic growth, especially gross domestic product (GDP). Due to the importance of the subject, the main purpose of this study is to investigate the simultaneous transfer between the exchange rate, inflation rate and GDP in the Iranian economy. Relationships between variables were investigated using a structural vector auto regression (SVAR) approach based on statistical data from 2009-2010. Using instantaneous response functions, sudden shocks in research variables and their effect on economic growth index (GDP) over 10 periods were investigated. Analysis of variance was also used to answer the research hypotheses. To show large fluctuations in both inflation and exchange rate variables, Hadrick-Prescott and Baxter King filters were examined. In general, the results showed that the exchange rate and inflation rate have a negative impact on the GDP index. There is also a positive relationship between the exchange rate and the inflation rate, ie with the increase of the exchange rate, the inflation rate increases.

Keywords

Political Sociology of Iran
Volume 5, Issue 9
November 2022
Pages 34-46

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