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The Impact of Exchange Rate Devaluation on Price Indices of Exported Goods in Iran

Author

Listed:
  • Nooraddin Sharify

    (Department of Economics, University of Mazandaran, Babolsar, Iran.)

  • Vahid Taghinezhad Omran

    (Department of Economics, University of Mazandaran, Babolsar, Iran.)

  • Tahereh Valinejad Ahangaree

    (University of Mazandaran, Babolsar, Iran.)

Abstract

Exchange rate is an important factor influencing price indices of exported goods of a country in different ways. Imported intermediate commodity is one of the important ways by which the change in exchange rate affects price indices of the exported goods. Using the input-output table of Iran for the year 2001, this paper investigates the impact of exchange rate devaluation on price indices of exported goods in Iran. The results of the research indicate that, when all agents do not adjust their earnings exactly with respect to price indices of products, the exchange rate pass-through is partial; therefore the increment in the level of exported prices is less than that of exchange rate variation. In contrast, when all agents adjust their earnings with respect to price indices, the price indices of all products will increase as much as exchange rate variation, hence, the pass-through is complete, and as a result, the current devaluation policy is neutral.

Suggested Citation

  • Nooraddin Sharify & Vahid Taghinezhad Omran & Tahereh Valinejad Ahangaree, 2017. "The Impact of Exchange Rate Devaluation on Price Indices of Exported Goods in Iran," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(1), pages 85-99, Winter.
    • Handle: RePEc:eut:journl:v:21:y:2017:i:1:p:85
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