The Symmetric Test of the Impact of the Real Exchange Rate on the Value-added of the Agriculture Sector in Iran: Application of the ‎Markov Switching Method‎

Document Type : Scientific paper

Authors

1 Professor of Economics, Department of Economics, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran

2 PhD student, Economics Department,, University of Mazandaran, Babolsar, Iran

Abstract

The purpose of this study is to test the real exchange rate symmetry impact of the real exchange rate ‎on the value-added of the agriculture sector in Iran from 1974-2015. Markov switching model was used for this purpose. ‎Also, using the Hodrick-Prescott method, positive impulses (real ‎exchange rate increase) and negative impacts (real exchange rate cuts) ‎were obtained. According to the research findings, the increase in the real ‎exchange rate in regime 1 has had a positive and significant effect on ‎the agricultural sector added value. It seems that the effect of the exchange ‎rate on the demand side has been more than the supply route and ‎increased costs. Also, the effect of the exchange rate on the zero ‎regimes was greater than the coast path, which reduced the production ‎of the agricultural sector. According to Wald's results, impulse effects are ‎asymmetric and confirm the results of the Markov shifting pattern. ‎According to the findings, the effects of the real exchange rate ‎increases and decreases in production agriculture are asymmetric. It is ‎suggested that the policymaker of the currency should avoid linear ‎policies. Since the effect of the real exchange rate is being examined, ‎there must be a synchronization between monetary and currency ‎policies.‎

Keywords

References

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Macroeconomics Research Letter
Volume 14, Issue 28
April 2020
Pages 39-60

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History

  • Receive Date: 29 May 2018
  • Revise Date: 06 August 2018
  • Accept Date: 11 January 2019

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