The Effect of Exchange Rate on the Imports of Paper Products in Iran

The paper industry plays an important role in the culture, economy and development of countries. Due to the lack of appropriate conditions, Iran has no advantage in producing various products of this industry. Therefore dependence for imports is obvious. On the other hand Iran has many problems in foreign exchange market. Which the most important is the limitation of foreign exchange reserves. This problem puts a heavy pressure on reserves and creates serious restrictions in the imports of all goods. Severe Sanctions have exacerbated that problem these years. Then identifying a good policy against, is necessary. Therefore, the aim of this study is to investigate how the exchange rate affects the import of the paper goods in order to find a fine strategy. This study considers the effect of exchange rate on import demand of paper in the period (1999-2019) using Auto-Regressive Distributed Lag (ARDL) and Error Correction Model (ECM) to investigate both short and long-term relationship of imports in the paper goods. The results show that paper products in Iran are Essential, their import demand is respectively affected by oil revenues, effective exchange rates, tariffs and value added and the import of all paper products are less elastic to the exchange rate. When the exchange rate falls, imports of paper products increase. Therefore in a situation where the country cannot cover the total needs and the economy faces severe foreign exchange reserves restrictions on imports, so the best policy is to increase recycling capacity in the country. This means that increasing recycling can reduce extra pressure on foreign exchange reserves. Also, the short-term relation with a coefficient of 1.152 moves toward the long-term equilibrium and there is a stable long-run equilibrium and relation between the variables of the model.