Investigating Effect of Exchange Rate Shocks on Inflation in Iranian Economy during Seasonal Period 2000-2012

Exchange rate policies and fluctuations in national currency play an important role in the stability of the macroeconomic environment as an economic objective of each country. The overall objective of this paper is to evaluate the effects of exchange rate changes on inflation in Iranian economy using quarterly time series data during 1379-1391 and a structural auto-regressive model (SVAR). Using quarterly data unit root test, stationary of time series has been tested in this study and then, the model has been estimated. In the period under review, the results of this study indicate that one of the most important factors and influencing on inflation is exchange rate fluctuations and generally exchange rate policies which has caused to a structural inflation in Iranian economy. Thus, adopted exchange rate policies in the economy including exchange rate integration policy and exchange rate stabilization policy, lead to inflation in Iranian economy.