Exchange Rate Analysis with an Emphasis on the Pathology of the Iranian Macroeconomics

According to the experience of the economy of Iran, the exchange rate is assumed as an exogenous variable and controlled by affixed but adjustable rate regime. While this regime would help stabilize inflation in the interim periods of exchange rate fixity, the discrete exchange rate adjustments would be disruptive for inflation performance and balance sheets in the case of depreciations and for non-oil exporters in the case of appreciations. Moreover, if inflation remains high, inducing strong real exchange rate (RER) appreciations, the occasional adjustments and their detrimental effects might be larger. In the last decade (1380-1390) such policy in an inflationary environment caused considerable fall in the real exchange rate (RER) which reduced productivity and competitiveness of the economy. In this paper the free market exchange rate determinants are studied based on the Iranian macroeconomics trends and with regard to exchange rate regime considerations in an oil-dependent economy, fiscal and monetary rules are recommended for the RER stability.

کلیدواژه ها:

Real Exchange Rate ، Exchange Rate Regime ، Oil Economy ، Economy of Iran