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Export and Exchange Rate: a Study Using Impulse Response Function in a Panel VAR model
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Hamidreza Ashrafzadeh   , Mitra Rahmani * , Zahra Aghajani , Habibeh Fathi |
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Abstract: (1139 Views) |
In the export promotion strategy one can reach to this idea that devaluation has a positive impact on export, and this can lead to GDP growth. Given the current situation of world economy in which many countries find themselves in the financial crises and U.S. economy go to a recurrent crises and stagnation, and given the especial situation of Iran which is far away from domestic and foreign equilibrium, this idea is gaining attention of policy makers in Iran. But at the same time this has many proponents and opponents, for example, manufacturers is concerned with the inflation of imported raw material and capital equipment which increase the cost of production, while proponents argue that devaluation has positive effects on export and GDP.
Also policy makers have other concerns about tuning the export promotion strategy. They most promote export and at the same time must be careful about keeping the internal equilibrium (mild inflation), the equilibrium of internal supply and demand, external balance (the equilibrium of balance of payment) and increasing employment. Therefore they most execute a mixture of monetary, fiscal and exchange rate policy for doing those tasks to reduce domestic absorption, attain balance of payment equilibrium, government budget equilibrium and taming inflation. For this purpose it is necessary to have a large scale econometric model for executing these programs. But with smaller model can attain this goal, as we done in this paper.
Here we pose this question that if devaluation has a positive effect on export and growth using a Panel VAR model to build a dynamic system to construct impulse response functions for panel VAR model and show positive effect of devaluation. Results show that devaluation has a positive impact on export and with reducing government consumption, inflation is reduced and the economy can reach to higher level of private sector investment. |
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| Keywords: Export, Exchange Rate, Panel VAR, Impulse-Response |
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Full-Text [PDF 467 kb]
(269 Downloads)
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notification: Research |
Subject:
Special
Received: 2013/12/16 | Accepted: 2014/04/16 | Published: 2013/12/22
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