Investigating the Effect of Iranian Electoral cycles on Fluctuations Exchange rate and Gold Markets;Application of Walras law

Document Type : Scientific paper

Authors

1 Professor of Economics at the Postgraduate Education Center of Payam Noor University in Tehran

2 Department of Economics, Tehran Payam Noor University, Tehran, Iran.

3 PhD Candidate, Department of Economics, Tehran Payam Noor University, Tehran, Iran.

Abstract

In recent years, the exchange rate has witnessed a lot of turmoil in the Iranian economy for many reasons such as inflation, monetary policy, all kinds of economic sanctions, etc. Research shows that in addition to economic variables, social and political factors have also affected the exchange rate fluctuations and the decisions of the owners. Election promises as shock on the eve of the election affect the expectations of currency market participants. Failure to fulfill promises causes irregular turmoil in this market, which is referred to as chaos. The chaos first disrupted the balance of the financial market, but it can eventually be overwhelmed and re -balance. This imbalance is transferred to related markets. In this article, it is attempted to analyze the impact of the presidential election on currency market turmoil and re-balance the Walras' approach in the period of 1979-1996 in the form of DSGE models. Monthly statistics suggests that although the shock from pre -election promises caused the currency market to chaos, its effects were not static. This shock has been dumped after the transfer to the market for other assets (gold) and re -balance in the market. As a result, the failure to fulfill the promises only in the short term has resulted in higher equilibrium price levels in the currency and gold market.

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Macroeconomics Research Letter
Volume 19, Issue 43
November 2025

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History

  • Receive Date: 14 August 2024
  • Revise Date: 21 October 2024
  • Accept Date: 14 November 2024

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