Effectiveness of Trade and Exchange Rate Policies on Exporting Garden Products: Evidences from Iran

Abstract

The current research intends to study the effectiveness of trade and exchange rate policies on exporting garden products in Iran. For the policies on exchange rate, the instability of the exchange rate and the dummy variable of exchange rate unification were considered in relation to trade policies, trade diversion and economic openness. To do so, the short term and long term relation between the variables of the export supply logarithmic function was determined according to ARDL model and the error correction model. The data was collected from the international trade database, the statistics of the agriculture ministry and the central bank’s site for 1997-2015. The results showed that, for long term, such variables as trade diversion, exchange rate instability, economic openness, export value of the stone fruits during previous years and the dummy variable of exchange rate unification were positively influencing on exporting Iran’s stone fruits. The value of error correction factor was estimated as -0.42 which is significant and indicates a more highly increased adjustment for long term equilibrium. Also, when a shock or diversion from equilibrium occurs, 0.58 of the short term imbalances are adjusted to reach the long term equilibrium.