Investigating the Effects of Exchange Rate Fluctuations on the Import and Export of Medicine in Iran from 2001 to 2014

Abstract

Background: The exchange rate is one of the factors whose deviation from equilibrium amounts can lead to the instability in economy performance at the macro level. This study attempted to investigate the effects of exchange rate fluctuations on the import and export of medicine in Iran during 2001-2014. Methods: This longitudinal study collected the required data in each season from 2001 to 2014. The sources of our data were Iran Central Bank, Islamic Republic of Iran Customs Administration, and Food and Drug Administration. The exchange rate and some other variables such as gross domestic product (GDP), oil revenues, and the relative price of medicine import and export were used in the medicine export and import model. Finally, by using E-views software, version 8, an Engle-Granger approach was utilized to investigate the long-term relationship between the study variables. The autoregressive integrated moving average model (ARIMA) was used to estimate the fluctuations in the exchange rate. Results: The results of estimating the equations by the use of the regression method indicated that every 1% increase in oil revenues would lead to a 0.13% increase in the medicine import in short-term. Every 1% increase in GDP would averagely lead to a 1.61% increase in the same variable in long-term. Moreover, the exchange rate fluctuations had a reverse effect on medicine exports so that a 1% increase in the exchange rate fluctuations would moderately result in a 0.17% decrease in medicine export in short-term. The relative price of import had no statistically significant relationship with any of the variables. Conclusions: Since medicine plays a specifically significant role in the health system and the pharmaceutical industry uses a large amount of exchange, fluctuations in the exchange rate have negative effects on the export of medicine; therefore, health officials and policy-makers need to pay much more attention to this issue.