Multiple Exchange Rate Regimes and Import Distortions: Micro Evidence from Iran (in Persian)

Multiple exchange rate regimes, still in place in dozens of emerging markets, distort imports and resource allocation by creating a gap between the official and market exchange rates. This paper uses Iran’s Customs data at the HS8 product level and monthly frequency from 2011 to 2023 to examine the effects of this policy structure. A detailed timeline of products eligible for subsidized exchange rates is constructed. The average effects of the policy are estimated using OLS regressions with product and time fixed effects, while heterogeneous effects across product groups are identified using a parallel generalized synthetic control approach. The findings show that a widening exchange rate gap, typically driven by an increase in the market rate, significantly raises imports of goods eligible for subsidized rates. This elasticity is larger for goods receiving greater subsidies and for intermediate products. However, the synthetic control results indicate that these effects are statistically significant only for a limited number of product categories. This paper provides the first micro-level evidence on how multiple exchange rate regimes shape the quantity and composition of imports.