The Effect of Exchange Rate Uncertainty on Import of Medical and Pharmaceutical Products in Iran

The field of medicine and medical equipment are partially dependent on the exchange rate. The aim of this study was to investigate the effect of real exchange rate uncertainty on the import of medical and pharmaceutical products during 1971-2012.
In this longitudinal study, the related data were collected from the World Bank, the Central Bank of the Islamic Republic of Iran and Iran customs office during 1971-2012. Generalized Autoregressive Conditional Heteroskedastic (GARCH) model was used for modelling the real exchange rate. In order to evaluate the impact of real exchange rate uncertainty on import of medical and pharmaceutical products, the exchange rate uncertainty index and other variables such as gross domestic product (GDP), oil revenues (OILR) and private sector health expenditure (PRI) were applied in the import model. Finally, VAR model was estimated using Eviews software version 6.
Estimation of medical and pharmaceutical products import model using Johansson test showed a significant negative coefficient for the exchange rate uncertainty variable. Error correction factor in this study was -0.039. Results show that in each period, 3.9 percent of the shocks in the short term can be adjusted to long-run equilibrium values.
The exchange rate uncertainty had a significant negative impact on imports of medical and pharmaceutical products. This issue is very important for policy makers of the health field and health economists.