Examining the Dynamic Relationship between Foreign Exchange Rate and GDP in Iran's Economy

Different viewpoints have been expressed on the effects of foreign exchange rate fluctuations on Iran's productions. Given the importance of this issue on policymaking and the possibility of affecting the production through foreign exchange rate, this paper tries to examine the relationship between foreign exchange rates and gross domestic products in Iran's economy by ARDL method within 1959-2000, and "Edwards" model has been taken as the base of the research. Iran's GDP fluctuations and the extent of its affectability have been studied with the help of governmental and private sectors investment explanatory variables, liquidity volume and the variety of foreign exchange rate. According to this research, contrary to many viewpoints expressed about Iran's economy, there is a negative though weak relation between real foreign exchange rate and Iran's products in a way that Iran's products do not show increase with the foreign rate decrease of the national currency (real foreign exchange rate does not have much effect on the production increase. Impulse response functions and analysis of variance were considered for examining the ways of Iran's GDP fluctuations that reaffirmed the previous conclusions.