Impact of Asymmetric Changes of Real Effective Exchange Rate on Agricultural Value Added in Iran: NARDL Approach

This study investigate the relationship between agricultural value added and real effective exchange rate shocks using the NARDL approach and seasonal data for the period 2009Q4 to 2017Q4 in Iran. The results of the bounds test indicate that there is a long-run equilibrium(co-integration) between variables and the estimation of the model shows that appreciation or depreciation in real effective exchange rate in the long run has a negative and significant effect on the value added of agricultural sector at 10 percent. Also, interest rate on banking facilities and government expenditures in agricultural sector had a negative and significant effect at 1 percent. The results of the Wald test indicate that in the short run, the effect of real effective exchange rate shocks on the agricultural value added is asymmetric and in the long run the effect of these shocks is symmetric. Both in the short run and in the long run, the appreciation in real effective exchange rate will have a greater impact on the value added of the agricultural sector compared with its depreciation.