An Econometric Analysis ofthe Impact ofNewExchange Policies onForeign Trade In IRAN

This paper analyzes the effects ofexchange policies on Iran,s foreign trade, by applying new econometric techniques. In assessing the impacts of depreciation of the national currency on macroeconomic variable, the real rather than nominal exchange rate has been determined to be more appropriate criterion to demonstrate the success or failure ofthe adopted policies. During the period under the study, trade balance improvements and its sustainity are contingent on the persistent appreciation of the real exchange rate (depreciation ofthe real value ofthe national currency) during the various periods oftime. Notably, the consistency between monetary and financial policies from one hand and exchange policies from the other hand is a necessary condition for maintaining such appreciation. The results of this study reveal that the lags of money stock ank import variables will significantly explaine the change in the non-oil exports. Furthermore, production variable, in the relevant equation, is influenced only by its own lags. This means that, during the period under the consideration, the monetary and exchange policies have not played an important role in fluctuations of the production. Ultimately, within import equation, the import will megerly be influenced by exchange rate lags. This phenomenon can be explained by the fact during the period under the study, import restriction, as a dominant variable, has played a key role in import changes in Iran. Overall, the results from the study on non-oil export,import and production denote that exchange policies and exchange rate ,movements do not play such an important role in changes of these variables