Comparing the impact of crude oil trade and economic growth on the real exchange rate in Iran

Fotros, Mohammad Hassan; Mazhary Ava, Maryam

doi:10.22050/pbr.2025.498351.1375

Comparing the impact of crude oil trade and economic growth on the real exchange rate in Iran

Document Type : Original Article

Authors

Mohammad Hassan Fotros ¹

Maryam Mazhary Ava ²

¹ Professor, Department of Economics, Faculty of Economics and Social Sciences, Bu Ali Sina University, Hamedan, Iran

² Assistant Professor, Department of Economics, University of Saravan, Sistan and Baluchestan, Iran

https://doi.org/10.22050/pbr.2025.498351.1375

Abstract

This article examines the relationship between crude oil trade, economic growth, and the real exchange rate in Iran from 1979 to 2023, utilizing the Autoregressive Distributed Lag (ARDL) approach. The findings indicate that crude oil exports have a negative and statistically significant influence on the real exchange rate. Conversely, crude oil imports have a positive and significant effect on the real exchange rate. Additionally, the budget deficit from the previous period has positively impacted the real exchange rate. Gross Domestic Product (GDP) has also demonstrated a significant positive effect on the real exchange rate. In contrast, the monetary base has shown a significant negative effect on the real exchange rate. Long-term analyses reveal that oil export variables negatively affect the real exchange rate, while crude oil imports contribute positively. Over the long term, GDP maintains a significant positive effect on the real exchange rate, whereas the budget deficit and monetary base variables do not significantly influence the real exchange rate. Short-term dynamics suggest that the real exchange rate from the previous period positively and significantly affects the current real exchange rate. Moreover, the budget deficit variable in the current period negatively and significantly impacts the real exchange rate. The monetary base also has a significant negative effect on the real exchange rate; Central Bank assets have been utilized as a proxy for the monetary base. Key Words: Oil exports, oil imports, real exchange rate, ARDL approach.

Highlights

Fluctuations in crude oil exports and imports have a significant impact on the exchange rate.
Variations in the exchange rate influence the volume of crude oil transactions and affect the GDP of nations.
Iran is dependent on oil revenues, so fluctuations in oil revenues affect the real exchange rate through the nominal exchange rate.
The effects of oil trade and economic growth on the real exchange rate in Iran are investigated and compared.

Keywords

Oil Exports

Oil Imports

Real Exchange Rate

ARDL Approach

Subjects

Oil and Gas Economics and Management

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