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An Empirical Analysis Of The Black Market Exchange Rate In Iran

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  • Abbas Valadkhani

Abstract

The Iranian rial has been depreciated on average about 12 per cent per annum during the last four decades. This paper examines the long- and short-run determinants of the black market exchange rate employing the cointegration techniques and the annual time series data from 1960 to 2000. Broadly consistent with previous studies, it is found that the black market exchange rate is cointegrated with inflation, real GDP and the import price index. However, in the short run only high inflation and a meagre real growth in GDP are responsible for the depreciation of Iranian currency.

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File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2003/DP%20144%20Valadkhani.pdf
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Bibliographic Info

Paper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 144.

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Date of creation: 20 May 2003
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Handle: RePEc:qut:dpaper:144

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Web page: http://www.bus.qut.edu.au/faculty/economics/
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  1. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  2. Pesaran, M.H., 1991. "The Iranian Foreign Exchange Policy And The Black Market For Dollars," Papers 33, California Los Angeles - Applied Econometrics.
  3. Farzin, Y. H., 1995. "Foreign exchange reform in Iran: Badly designed, badly managed," World Development, Elsevier, vol. 23(6), pages 987-1001, June.
  4. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  5. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, September.
  6. Bahmani-Oskooee, Mohsen, 1996. "The black market exchange rate and demand for money in Iran," Journal of Macroeconomics, Elsevier, vol. 18(1), pages 171-176.
  7. Mohsen Bahmani-Oskooee, 1996. "The Decline of the Iranian Rial During the Post Revolutionary Period: A Productivity Approach," Working Papers 9615, Economic Research Forum, revised May 1996.
  8. Pesaran, H., 1995. "Planning and Macroeconomic Stabilization in Iran," Cambridge Working Papers in Economics 9508, Faculty of Economics, University of Cambridge.
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Cited by:
  1. Mohammad Reza Farzanegan, 2008. "Illegal Trade in the Iranian Economy: Evidence from a Structural Model," CESifo Working Paper Series 2397, CESifo Group Munich.
  2. Abbas Valadkhani & Majid Nameni, 2011. "How can Iran's black market exchange rate be managed?," Journal of Economic Studies, Emerald Group Publishing, vol. 38(2), pages 186-202, May.

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