چکیده:
One of the main issues in international finance is the ratio of exchange rate pass through to consumer prices. The main objective of this study is to examine the exchange rate fluctuations and its asymmetric effect on consumer prices in Iran’s economy. In the present study, the effects of positive and negative impacts of the exchange rate on inflation rate and other macroeconomic variables of Iran during the period from 1988 to 2017, in the framework of a recursive VAR model have investigated. The results indicate that exchange rate pass through in the short run is 33.5% and in the long run is 43.03%, which indicates that the exchange rate is incomplete. In addition, the results indicate the asymmetric effect of the exchange rate, which is about 38.43% increase in the exchange rate and 16.38% decrease in the exchange rate negatively reflected in consumer price inflation.
خلاصه ماشینی:
In the present study, the effects of positive and negative impacts of the exchange rate on inflation rate and other macroeconomic variables of Iran during the period from 1988 to 2017, in the framework of a recursive VAR model have investigated.
Keywords : Exchange Rates Pass Through, Inflation, Asymmetric Effect, VAR Model JEL Classification: E2, E3, E22, E33 1 Introduction Studying the responses of prices due to exchange rate changes is of great importance in open economies.
For example, several empirical studies, which evaluate the degree of exchange rate pass through, assume that exchange rate changes on import and export prices are symmetric (Froot & Klemperer, 1989; Dornbusch 1987; Taylor 2000; Devereux & Yetman, 2002).
5. 6 A Model for Asymmetry of ERPT The model used to analyze the asymmetric effect of the exchange rate pass-through to consumer prices is derived based on the studies of Bailliu and Fujii, (2004) and Khundrakpam (2007), which are described in literature review.
Thus, the specification of the main model for analyzing the exchange rate pass-through and its asymmetric effect are determined in the following formula which includes the impacts of lags of variables and the oil revenues shocks.
Therefore, according to the results of this research and the importance of currency fluctuations in explaining inflation in the Iran’s economy, which confirmed by the study of Sarem and Mehrara (2013), the Central Bank monetary policy must respond to exchange rate fluctuations.
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