Investigating the Effect of Exchange Rate Fluctuations on the Smuggling Rate of Goods in Iran under Sanctions Situations

Document Type : Scientific paper

Authors

1 1Professor of Economics, Department of Economics, University of Mazandaran, Babolsar, Iran,

2 Ph.D. in Economics, Department of Economics, Ferdowsi University of Mashhad, Iran

3 MSc in Financial Management, Department of Management, Islamic Azad University, Yadegar Emam, Shahr Rey, Iran

4 MSc in Law, Department of Law, Islamic Azad University, Ahvaz, Iran

Abstract

In the present study, the effect of exchange rate fluctuations on the smuggling rate of goods in two cases with and without sanctions in 1352-1398 has been investigated annually. In the present study, the Daubechies wavelet transform approach has been used to extract exchange rate fluctuations, and the principal component analysis approach has been used to extract the factor loading of the sanctions index. Finally, to investigate the effect of exchange rate fluctuations according to the period of fluctuations in two cases with and without the sanctions index on the smuggling rate of goods in the country, the Markov switching model has been used. The results show that increasing trade openness regardless of the level and regime of smuggling in the country significantly reduces smuggling. The increase in tax revenues has also had a positive and significant effect on all levels of smuggling. Increasing the size of government in a situation where the smuggling rate of goods is low, has a positive and significant impact on smuggling of goods. Short-term and long-term exchange rate fluctuations in the conditions without sanctions and with sanctions have had a positive and significant effect at all levels and regimes of smuggling of goods and the positive effect of long-term exchange rate fluctuations has been stronger, especially in terms of sanctions. The official exchange rate gap has also had a positive and significant effect on smuggling of goods in high regime. Therefore, the share of the National Development Fund in oil and gas sales revenues should be increased in order to increase the foreign exchange resources of the Central Bank, and in the event of sanctions, it can prevent exchange rate fluctuations, especially in the long run.

Keywords

References

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Macroeconomics Research Letter
Volume 17, Issue 33
April 2022
Pages 35-59

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History

  • Receive Date: 16 July 2021
  • Revise Date: 24 August 2021
  • Accept Date: 07 September 2021

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