International Commerce
Azadeh Alikhani; Seyed Komeil Tayebi; saeed Daei-Karimzadeh
Abstract
Most of the countries using complicated multiple rate systems have been subject to inflationary pressures and to a more or less rapid rise in domestic costs and prices. Such an environment greatly complicates any exchange policy, because the exchange rate has to be adjusted frequently to keep an appropriate ...
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Most of the countries using complicated multiple rate systems have been subject to inflationary pressures and to a more or less rapid rise in domestic costs and prices. Such an environment greatly complicates any exchange policy, because the exchange rate has to be adjusted frequently to keep an appropriate relation between domestic and external costs and prices. Considering this, the present study examines the effects of exchange rate unification policy on the aggregate import price index from 1979 to 2023. For this purpose, the most influential variables affecting the aggregate import price index are first identified using the Time-Varying Parameters Dynamic Model Averaging (TVP_DMA) framework. Subsequently, Then, the impacts of exchange rate unification shocks on the aggregate import price index are examined within the time-varying parameter vector autoregression (TVP-VAR) model. The results indicate that exchange rate unification leads to an increase in the aggregate import price index, with significant short-term effects that gradually diminish over the long term. Additionally, higher instability in the foreign exchange market causes the nature of the impacts (both in terms of intensity and duration) on the aggregate import price index to differ compared to other periods.Keywords: Multiple Exchange Rates, Unification, The Aggregate Import Price Index, Shock, The Exchange Rate Pass-through.
