Investigating the Short Term and Long Term Impact of Exchange Rate and Inflation Fluctuation on Iran's Non-Oil Export

Abstract

That emerged more than before in recent decades is internalization of commerce and companies movement toward global market. In order to enter to this global market, companies benefited from different approaches which one of them is development of export. But, it can be said that a wide set of factors affect export. Among important effective factors on foreign trade pattern are fluctuations of variables such as exchange rate and inflation rate. Risk derived from exchange rate fluctuations is one of the factors that always is considered as a problem for country economy especially foreign trade section. This issue is so important that in some cases this risk exerts vast and irrecoverable damage to exporters. The purpose of this study is investigating the impact of exchange and inflation rate fluctuations on the amount of export of exporters in different sectors of country (Iran) during 2001 to 2010 based on monthly data. Generalized autoregressive conditional heteroskedasticity (GARCH) method was used in order to calculate the fluctuations and Vector Auto Regression (VAR), impulse response Function (IRF), Variance Decomposition (VD) and Autoregressive Distributed Lag model (ARDL) methods were used to investigate the short term and long term impacts of exchange rate and inflation rate fluctuations on export. Findings generally show that the impact of internal exchange rate and inflation rate fluctuations on export power of exporters in short term is more and associated impacts in long term is decreased and neutralized.