Abstract
Investigating the effect of exchange rate fluctuations on gross domestic product (GDP), private consumption, exports, imports and investment is of particular importance. In this study, we apply the exchange rate fluctuations which are analyzed in both expected and unexpected components; the unanticipated components fluctuations include positive and negative shock. In addition, we applied the time series data of 1978-2010 and an auto-regressive model with Distributed Lags (ARDL) to find the relation between variables. The main findings of the model from a positive shock (increase in exchange rate or decrease in money value), negative shock (decrease in exchange rate or increase in money value) and exercising fiscal and monetary policies show that the expected fluctuations have a negative effect on GDP, private consumption, exports, imports and investment. On the other hand, positive unexpected fluctuations (positive shock) have a positive effect on exports but they have a negative impact on all other variables. Finally, it was found that negative unexpected fluctuations have a negative effect only on export but they have a positive impact on all other variables.
MASOUD NONEJAD, MASOUD MOHAMMADI. (2016) The Effect of Exchange Rate Fluctuation on Economic Activities of Iran, International Review of Management and Business Research, Volume 5, Issue 2.
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