چکیده:
This paper uses monthly price indices of 448 items of manufacturing sector in 2004:4 to
2016:01, to study the effect of exchange rate and its volatilities on price setting behavior
of manufacturing sectors. Given that, many manufacturing sectors in Iran need to import
raw materials, intermediate and capital goods in their production process, it is expected
that exchange rate variations affect price setting behavior indices (frequency and size of
price changes) in various manufacturing sectors. The results show that an increase in the
exchange rate and also an increase in the exchange rate volatility lead to an increase in
the frequency of price changes. In addition, while the exchange rate, itself, does not affect
the size of price changes, the exchange rate volatility negatively affects the size of price
changes. That is, manufacturers’ response to the exchange rate increase is limited to an
increase in the frequency of price changes, but an increase in the exchange rate volatility
increases the frequency of price changes and decreases the size of price changes. Also,
the frequency of price changes in manufacturing sectors with high level of
competitiveness and low level of raw material inventory is positively affected by the
exchange rate increase.
خلاصه ماشینی:
There are other studies that emphasize on the positive effect of inflation on price setting behavior (see Golosov and Lucas (2007), Sheshinski and Weiss (1977), Benabou and Konieczny (1994)).
Source: Research Findings Figure 3 is another scatter plot which shows the relationship between the percent of state-owned firms and the correlation of the exchange rate and the frequency of price change at the industry level.
According to the results, exchange rate growth does not have any significant effects on the frequency and also the size of price change in both sub-samples; export-oriented industries and non-export- oriented industries.
According to the results, in the industries with lower share of private owners the exchange rate growth and its volatility impact positively on the frequency of price change and do not affect the size of price change.
Comparing the estimated coefficients demonstrates while the size of price change is not affected by exchange rate growth in both sub-samples, the effect of exchange rate on the frequency of price change is positive and significant only in the industries with lower dependency on import.
But, the frequency and size of price change in the less import dependent industries are affected by exchange rate growth and volatility.
Source: Research Findings 6 Conclusion and Policy Recommendation In this research, the effects of growth and volatility of the exchange rate on the price-setting behavior of Iranian industrial firms are investigated.
Some of the most important results are as follows: The volatility of the exchange rate positively affects the frequency of price change in the export-oriented industries.