Thesis of Master of Economics
Abstract:
One of the most important factors influencing the trade of any country and any economic sector for what has been proposed in economic theories is the exchange rate and the national income of the neighboring countries. It is commercial. Therefore, it is important to know these variables and how they affect exports and imports, which are the two main pillars of trade. In the present study, in addition to the effect of each of the above-mentioned variables on export and import functions, the effect of exchange rate fluctuations, which is one of the controversial topics in the field of trade, has also been analyzed and investigated. Since Iran has had a good trade relationship with Venezuela in the last decade and hopes to improve this relationship, we intend to examine the impact of exchange rate fluctuations on bilateral trade between Iran and Venezuela. The data used in this research are the annual data for the years 2013 to 2014. In this research, the uncertainty variable of the exchange rate is calculated from the disturbance component of the Garch model, and the self-explanatory method with distributed intervals (ARDL) and the error correction model (ECM) are used to conduct this research. The results show that the uncertainty coefficient of the exchange rate at the confidence level of 95% has a significant and negative effect in the short term for both models. It has exports and imports, but it does not have a significant effect on exports in the long run. While this effect is negative and significant for the long-term import model. Also, the coefficient of the GDP and exchange rate variables are significant at the 95% confidence level for both models in the long term, but the exchange rate coefficient is not significant for the export model in the short term.
Key words: Bilateral trade, exchange rate fluctuation, Iran, Venezuela, ARDL method
Chapter one:
General research
1- Introduction
In the history of economic ideas, the discussion of the effectiveness and importance of foreign trade to achieve economic growth and also to access healthy economic competition starts from the era of mercantilism and economic traders. In fact, foreign trade can be considered as one of the important drivers of economic growth. On the other hand, the phenomenon of the globalization of the economy and the disappearance of the commercial borders of the country is taking shape, and in the not too distant future, countries will hardly be able to withdraw themselves from this flow and watch the commercial developments between countries only on the sidelines. Therefore, it can be said that trade plays an important role in the economy of countries. Most countries seek to develop trade with other countries in order to increase economic growth, so it is expected that Iran will somehow synchronize itself with the changes in trade in the world and prepare to compete and enter the international trade scene. One of the most important factors influencing the trade of any country and any economic sector for what is proposed in economic theories is the exchange rate and the national income of the trading partner countries. Therefore, it is important to know these variables and how they affect exports and imports, which are the two main pillars of trade. In the present study, in addition to the effect of each of the above-mentioned variables on export and import functions, the effect of exchange rate fluctuations, which is one of the controversial topics in the field of trade, was also investigated. It has been analyzed and investigated. 1-2- problem statement
Exchange rate is one of the most important variables of international trade. Dealing with trade between countries without considering the currency regime cannot reach the final goal of trade. Different countries sometimes sign agreements bilaterally. These agreements are implemented step by step over time. Factors affecting the implementation of agreements are divided into two parts: controllable and uncontrollable factors, one of the most important and volatile variables is the exchange rate.The direction and extent of the effect of the exchange rate on the trade balance is one of the important topics and issues that have been addressed in many applied studies.
There are various foreign currency intervention tools of governments, among them, we can mention the reduction of the foreign value of the national currency, the increase of the foreign value of the national currency, multi-rate currency systems, etc. Governments use these currency instruments to create external balance, which are proposed as part of the government's set of economic measures to improve the country's balance of payments. Reducing the foreign value of the national currency is often one of the important components of structural adjustment programs, especially among the factors prepared by the International Monetary Fund and the World Bank.
Proponents of currency devaluation believed that devaluation of the national currency would increase production and, as a result, raise the level of employment, income, and exports, as well as improve the trade balance and compensate for the balance of payments deficit. But in 1972 the U.S. trade balance not only did not improve, but worsened as the dollar weakened. Therefore, the researchers decided to determine the short-term and long-term effects of weakening the value of the national currency on the trade balance. In this regard, two main methods have been proposed to investigate the effects of exchange rate changes on the trade balance: the first method is the Marshall-Lerner elasticity approach, which considers the effect of devaluation of the national currency on the trade balance as instantaneous and provides a static analysis of it, but the second approach, which is known as the j-curve effect, unlike the previous method, states that the reaction of the trade balance to exchange rate changes was not only instantaneous, but had a dynamic aspect. It may happen during a period of time (Kazroni and Mujiri, 2019).
In Iran, like some developing countries, the reduction of the external value of the national currency is designed with various economic goals, including improving the balance of payments. To examine the effectiveness of the country's foreign exchange policy, it can be seen in the form of bilateral relations. In the last decade, Venezuela has been one of Iran's trading partners, and the relationship Its trade with Iran is improving and bilateral agreements have been concluded between these two countries in the field of trade during the last decade. In this thesis, while examining the effect of exchange rate and national income of the two countries, the effect of exchange rate fluctuations on Iran's exports and imports. We will investigate Venezuela.
1–3- The importance and necessity of conducting research
As you know, in recent years our country has faced the issue of embargo by some countries, so efforts to improve trade with other countries are of particular importance. In this regard, Venezuela is one of the countries whose trade relationship with Iran is improving in recent years, and maintaining this relationship and improving it requires identifying the factors affecting trade. Since, according to economic theories, the exchange rate and its fluctuations are among the most important factors affecting trade, we are determined to examine the impact of these factors on Iran's trade with Venezuela.
1– 4 - research objectives
The main purpose of this research is to investigate the short-term and long-term effects of exchange rate fluctuations on Iran's bilateral trade with Venezuela. The questions of the present research are as follows:
Do exchange rate fluctuations in the long term affect Iran's imports from Venezuela?
Do short-term exchange rate fluctuations affect Iran's imports from Venezuela?
Do exchange rate fluctuations affect Iran's exports to Venezuela in the long term?
Do short-term exchange rate fluctuations affect Iran's exports to Venezuela? exports Does Iran affect Venezuela?
1– 6 - research hypotheses
The hypotheses of this research are:
Long-term exchange rate fluctuations have a significant and negative effect on Iran's imports from Venezuela.
Short-term exchange rate fluctuations have a significant and negative effect on Iran's imports from Venezuela.
Long-term exchange rate fluctuations have a significant and negative effect on Iran's exports to Venezuela.
Exchange rate fluctuations In the short term, it has a significant negative effect on Iran's exports to Venezuela.