The Symmetric Test of the Impact of the Real Exchange Rate on the Value-added of the Agriculture Sector in Iran: Application of the Markov Switching Method
The purpose of this study is to test the real exchange rate symmetry impact of the real exchange rate on the value-added of the agriculture sector in Iran from 1974-2015. Markov switching model was used for this purpose. Also, using the Hodrick-Prescott method, positive impulses (real exchange rate increase) and negative impacts (real exchange rate cuts) were obtained. According to the research findings, the increase in the real exchange rate in regime 1 has had a positive and significant effect on the agricultural sector added value. It seems that the effect of the exchange rate on the demand side has been more than the supply route and increased costs. Also, the effect of the exchange rate on the zero regimes was greater than the coast path, which reduced the production of the agricultural sector. According to Wald's results, impulse effects are asymmetric and confirm the results of the Markov shifting pattern. According to the findings, the effects of the real exchange rate increases and decreases in production agriculture are asymmetric. It is suggested that the policymaker of the currency should avoid linear policies. Since the effect of the real exchange rate is being examined, there must be a synchronization between monetary and currency policies.
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