<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>There has been a long debate about whether exchange rate depreciation promotes output growth or not. In this context, we use Iran’s foreign exchange market which has had large fluctuations in recent years. Since the exchange rate influence on industries’ activity through different mechanisms, we examine the exchange rate effects in the industry level. To do this, the Iranian manufacturing industries data at 4-digit ISIC level are used from 2011 to 2017. The results of GMM dynamic panel data estimations show that the effects of real exchange rate depreciation on average, are positive in the non-crisis periods. But this relationship does not remain valid in a currency crisis conditions. Accordingly, depreciation does not have any positive effects during the currency crisis. Also, estimation results indicate the exchange rate volatility negatively affects industrial production in all periods. Our findings confirm that due to different characteristics of industries, the effects of exchange rate on production vary among them. So, export orientation, access to the preferential rate and higher level of raw material inventory amplify the positive effect of the real depreciation while import dependency and a higher level of final goods inventory fade the effect and turn into negative in some industries.</p>
</abstract>

There has been a long debate about whether exchange rate depreciation promotes output growth or not. In this context, we use Iran’s foreign exchange market which has had large fluctuations in recent years. Since the exchange rate influence on industries’ activity through different mechanisms, we examine the exchange rate effects in the industry level. To do this, the Iranian manufacturing industries data at 4-digit ISIC level are used from 2011 to 2017. The results of GMM dynamic panel data estimations show that the effects of real exchange rate depreciation on average, are positive in the non-crisis periods. But this relationship does not remain valid in a currency crisis conditions. Accordingly, depreciation does not have any positive effects during the currency crisis. Also, estimation results indicate the exchange rate volatility negatively affects industrial production in all periods. Our findings confirm that due to different characteristics of industries, the effects of exchange rate on production vary among them. So, export orientation, access to the preferential rate and higher level of raw material inventory amplify the positive effect of the real depreciation while import dependency and a higher level of final goods inventory fade the effect and turn into negative in some industries.

Differences in Exchange Rate Effects on Production Growth: the Case of Iranian Industries

Studies in Business and Economics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

There has been a long debate about whether exchange rate depreciation promotes output growth or not. In this context, we use Iran’s foreign exchange market...

Differences in Exchange Rate Effects on Production Growth: the Case of Iranian Industries

Publicado en línea: 26 ene 2021

Páginas: 16 - 35

DOI: https://doi.org/10.2478/sbe-2020-0042

Palabras clave
Exchange Rate, Volatility, Production, Export Oriented, import dependency

© 2020 Ebrahimi Sajad et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Differences in Exchange Rate Effects on Production Growth: the Case of Iranian Industries

Publicado en línea: 26 ene 2021

Páginas: 16 - 35

DOI: https://doi.org/10.2478/sbe-2020-0042

Palabras claveExchange Rate, Volatility, Production, Export Oriented, import dependency

© 2020 Ebrahimi Sajad et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Palabras clave
Exchange Rate, Volatility, Production, Export Oriented, import dependency