The effects of trade openness and some macroeconomic variables on exchange rate volatility in Iran

Document Type : Research Paper


Department of Economics, Shiraz Branch, Islamic Azad University, Shiraz, Iran


The present study aimed to investigate the relationship between trade openness and exchange rate volatility in Iran. To this end, we estimated our model through the autoregressive distributed lag (ARDL) method using data from 1979 to 2019. Findings indicated the positive effect of money supply and government expenditures and the negative and favorable effects of trade openness, economic growth, currency system, and oil prices on exchange rate volatility in the short and long term. Even though the impact of economic growth and government expenditures were insignificant, increasing the money supply had the highest adverse effect on the foreign exchange market, and increasing trade openness and the Fixed Exchange Rate System decreased the exchange rate volatility. The currency system and monetary discipline of the Central Bank, along with the trade openness policy can have significant effects on reducing exchange rate volatility and economic stability in Iran.


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Volume 14, Issue 1
January 2023
Pages 2351-2360
  • Receive Date: 28 November 2021
  • Revise Date: 08 February 2022
  • Accept Date: 15 February 2022