1
Ph.D. Candidate in Economics, Shahid Beheshti University
2
beheshti university
10.22034/es.2023.366866.1629
Abstract
Severe currency jumps and severe weakening of the rial value in recent years have caused irreparable damage to Iran's economy. In this article, the analytical approach of some of the country's economic policy makers, based on the theory of purchasing power parity, has been examined, based on the necessity of increasing the exchange rate to the extent of the difference in domestic and foreign inflation rates. In this way, first, the empirical test of the theory of purchasing power parity in the short and long term is discussed using the (ARDL) approach. Then, from another aspect, it evaluates the validity of the above claim based on the mutual and simultaneous relationship between monetary and currency variables using the (GMM)approach in the time period of 1346-1400.The results indicate that, firstly, the exchange rate in the informal market does not follow the theory of purchasing power parity in the short and long term. Secondly, the results of the system of simultaneous equations(GMM) show that there is a bidirectional relationship between the exchange rate variables and the price level. In addition, the effect of the exchange rate on the increase in prices is greater than the effect of prices on the increase in the exchange rate. Therefore, according to these results, the policy approach of pricing the exchange rate based on the difference in domestic and foreign inflation rates cannot be the right approach, and determining the exchange rate in this way leads to a sharper increase in prices and creates livelihood bottlenecks.
abbasgholi nezhad asbaghi, R., & DAVOODI, P. (2023). The issue of the Value of the National Currency, Purchasing Power Parity Theory and The Interrelationship of Monetary and Exchange Rate Variables. Economic Strategy, (), -. doi: 10.22034/es.2023.366866.1629
MLA
rana abbasgholi nezhad asbaghi; parviz DAVOODI. "The issue of the Value of the National Currency, Purchasing Power Parity Theory and The Interrelationship of Monetary and Exchange Rate Variables". Economic Strategy, , , 2023, -. doi: 10.22034/es.2023.366866.1629
HARVARD
abbasgholi nezhad asbaghi, R., DAVOODI, P. (2023). 'The issue of the Value of the National Currency, Purchasing Power Parity Theory and The Interrelationship of Monetary and Exchange Rate Variables', Economic Strategy, (), pp. -. doi: 10.22034/es.2023.366866.1629
VANCOUVER
abbasgholi nezhad asbaghi, R., DAVOODI, P. The issue of the Value of the National Currency, Purchasing Power Parity Theory and The Interrelationship of Monetary and Exchange Rate Variables. Economic Strategy, 2023; (): -. doi: 10.22034/es.2023.366866.1629
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