Investigating the Exchange Rate Pass-Through to the Consumer Price Index in Iran using BAYSIAN approaches

Document Type : Scientific paper

Authors

1 University of Tabriz

2 university of tabriz

3 portland university

Abstract

The main purpose of this research is to investigate the important economic factors affecting the exchange rate pass-through to the Consumer Price Index (CPI) of Iran during the period 1993 to 2020. In this regard, by using the two methods of Bayesian model averaging (BMA) and weighted average least squares (WALS), which have been widely considered in recent years, the important factors affecting the exchange rate transition and the order of importance of these variables in Iran are determined, as well as, Random Forest (RF) algorithm has been used to determine the importance and ranking of identified factors.
The results of BMA and WALS methods indicate that the variables of government size, level of development, economic uncertainty, and economic conditions are among the most important macroeconomic factors affecting the exchange rate. According to the research findings, controlling the effects of the exchange rate increase on consumer prices (exchange rate pass-through), reducing the size of the government, controlling economic uncertainties, improving economic conditions, and improving the level of development is an inevitable necessity in Iran, Therefore, The most important policy recommendations of this research are to control the effects of the exchange rate increase on the consumer price index in Iran

Keywords

Main Subjects

References

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Macroeconomics Research Letter
Volume 17, Issue 36
December 2022
Pages 39-65

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History

  • Receive Date: 12 November 2023
  • Revise Date: 04 December 2023
  • Accept Date: 15 December 2023

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