The Impact of Predictable and Unpredictable Exchange Rate Shocks on GDP Fluctuations in Iran

Abstract

This research aimed to evaluate the impact of predictable and unpredictable exchange rate shocks on GDP fluctuations in Iran. This applied research in terms of its objective is a survey-descriptive study regarding its inference method and a causal-correlational investigation because of its dependence on the relationship between variables and the effect of an independent variable, as well as a post-event study concerning its design. All the statistics and data needed for this research were extracted from the economic reports and the balance sheet of the Central Bank from 2015 to 2016. According to the nature of time series data and the type of study, the effect of predictable and unpredictable exchange rate shocks on GDP fluctuations and the long-term relationship between variables were examined using the autoregression distributed lag (ARDL) model. Data were analyzed using Eviews version 9 software. According to the results, predictable shocks have long-term negative and significant effects on production fluctuations in Iran while unpredictable shocks have a positive and significant effect on production fluctuations in Iran in the long term.

Keywords: Predictable shocks, unexpected shocks, exchange rate, GDP fluctuations