Evaluation the Effect of Exchange Rate Fluctuations on Medical Care Price Indexes in Iran

Given the importance of medical care on the public health and its high inflation rate relative to the changes in the cost of living in Iran, this research is to study the effects of exchange rates on the inflation of medical care.
In this study, an ARCH model has been used to examine the effects of exchange rate fluctuations on the consumer and producer price indexes of medical care for a quarterly dataset over the period 2004 -2014. Moreover, ECM integration method has been applied to investigate the long-term relationship between the variables.
Based on the results of ARCH and ECM models, exchange rate, liquidity and GDP have the significant and positive impact son medical care price index in the short and long-term. The finding show that the effects of exchange rate changes on medical care price index for consumer price index and producer price index are0/23 and 0/14 in the short-term and 0/327 and 0/256 in long-term respectively.
However the finding of this study asserts a stronger relationship between exchange rate and medical care over the consumer price index compare to the producer price index.