The Effect of Real Exchange Rate Volatility on the Export of Iran's Petrochemicals: Markov-Switching Approach

The main objective of this paper is investigation of the impact of real exchange rate volatility on exports of Iran petrochemical over the period of 1970-2010. In order this goal the real exchange rate volatility index has been estimated by EGARCH (0، 1) model. Then by using nonlinear Markov switching model the impact of this index، with other variables in the exporting Iran''s petrochemical sector. The main findings of the Markov switching model (MS-AR) show that the real exchange has investigated (in three regimes) and export prices (in regime 1)، have negative and significant effects on exports of petrochemicals and world’s GDP in regimes 1 and 2، Iran’s GDP in regime 1 and trade openness in all three regimes have positive and significant effects on exports of petrochemicals.