A Survey of the Effects of Trade Shocks on Macroeconomics Variables in Different Exchange Rate Regimes by Using Structural VAR in Developing Countries

Document Type : علمی

Authors

Seyed Kamal Sadeghi

Mohammad ali Motafaker Azad

Mohamad Reza Salmani bishak

Parvin Alimoradi Afshar

https://doi.org/10.22067/pm.v20i5.34035

Abstract

This paper surveys the effects of trade shocks on macroeconomics variables in different exchange rate regimes in developing countries in period 1990-2009 by using Friedman’s hypothesis.
The results show that trade shocks causes greater real output volatility in countries adopting fixed exchange rate regimes relative to those adopting flexible exchange rate regimes. Also, variance decomposition analysis demonstrates that, in fixed exchange rate regimes, trade shocks have a maximum effect in explaining the fluctuations in Gross Domestic Products. The contribution of trade shocks in explaining the fluctuations in real output is between 45% and 71% for countries adopting fixed regimes and between 1% and 11% for countries adopting flexible regimes. Generally, as a whole the results of the study for all countries except Iran are in accordance with Friedman’s hypothesis.

Keywords

Terms of Trade

Structural VAR

Exchange Rate Regimes

Friedman’s Hypothesis

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