The Impact of Real Exchange Rate on Exports of Wood Industry and Paper Industry (1977-2010)

Document Type : پژوهشی

Authors

• sadegh bafandeh imandoust
• Mohsen Rastin

Payame Noor University

https://doi.org/10.22067/pm.v22i9.21053

Abstract

Export growth hypothesis increased export can perform the role of “engine of economic growth” because it can increase employment, create profit, trigger greater productivity and lead to rise in accumulation of reserves allowing a country to balance their finances.
Export earnings assume vital importance not only for developing, but also for developed countries. Developed countries mainly export capital and final goods, while the main part of export of developing countries consists of mining-industry goods especially natural resources.
Wood and paper industry could be very important for economic development as non-oil export. Because of fraternity and value added aspect in these industries, it has especial effect on country economic.
The main objective of this study is to analyze the impact of changes in the real exchange rate on Wood and Paper Industry Export and to suggest policy proposals which may be useful for policymakers in non-oil export promotion issues.
Theoretical frame work
There is huge number of studies that investigate the impact of exchange rate on export. But according to our research objective we try mainly to focus on studies that investigate this relationship in case of oil dependent economies like Iran.
For investigating relationship between Real Exchange Rate and Export different methods can be utilized like: The Elasticities Approach, The Absorption Approach and MonetaryApproach.
Methodology
The vector autoregression (VAR) is an econometric model used to capture the linear interdependencies among multiple time series. VAR models generalize the univariate autoregressive model (AR model) by allowing for more than one evolving variable. All variables in a VAR are treated symmetrically in a structural sense (although the estimated quantitative response coefficients will not in general be the same); each variable has an equation explaining its evolution based on its own lags and the lags of the other model variables. VAR modeling does not require as much knowledge about the forces influencing a variable as do structural models with simultaneous equations: The only prior knowledge required is a list of variables which can be hypothesized to affect each other intertemporally.
This paper investigates the impact of the real exchange rate on wood industry export during 1977-2010 has been studied. For this purpose vector auto regressive (VAR) model has been used and by Johansson approach, supply and demand of export will be estimated, then by using of error correlation model (ECM) short term and long term relationship have been combined.
Results & Discussion
Based on findings of present study can be concluded that appreciating real exchange rate has positive and significant effect on supply and demand of wood and paper industries. In addition, tariff rate of import has negative effect on export supply.
Since promotion of non-oil export is one of the urgent issues of the strategic economic policy of Islamic Republic of Iran then findings of this study may be useful for policymakers.
Conclusions& suggestions
Real Exchange Rate and Wood& Paper Industry Export are strongly connected. Although, based on findings, increasing real exchange rate has positive and significant effect on supply and demand of wood and paper industries, but worth of national money should be moderate in short range.
In account of high rate of Competition in the world hiking the export price should be avoided.

Keywords

• Real Exchange Rate
• VAR, Demand and Supply Function of Export
• Wood Industry
• Paper Industry

References

[1] Allah Verdi Zade, S. (2008). The Effect of Exchange Rate and GDP in Developing The Non-oil Exports of Iran. Ministry of Economy and Finance.(In Persian).

[2] Ashrafzadeh, H. Asgari, M. (2007). The Effects of Trade Policies and Foreign Policies on Industrial Goods Trade in Iran. Quarterly Journal of Commerce. 39. 83-108. (In Persian).

[3] Behar, A & Edwards, L. (2004).Estimatig Elasticities of Demand and Supply for South African Maufacturing Exports Using a VECM.The Center for The Study of African Economics, Working Paper Series.

[4] Bond M. (1987). An Econometric Study of Primary Commodity Exports from Developing Country Regions of the World. IMF Staff Paper. 34 (2), 191-217.

[5] Chein Thang, N. (2003). Using ECM Model to Assess The Impact of Real Exchange Rate on Vietnames Export Performance. Vietnames Socio-Economic Development: A Social Science Review. 33. 69-80.

[6] Dornbuch, R. (1974).Tariffs and Nontraded Goods.Journal of Iternational Economic, University of Rochester.4 (2).177-185.

[7] Dunn, R.M. and Mutti, J.H. (2004).Internatoinal Economics, 6thed,PablishedintheTaylorand Francise–Library.

[8] Edwards, S. (1988). Real and Monetary Determinants of Real Exchange Rate Behaviour: Theory and Evidance From Developing Countries. Natinal Bureau of Economic Research. Massachusetts Avenue Cambridge. 29. 311-341.

[9] Fidan, Halil. (2006). Impact of The Real Effective Exchange Rate (Reer) on Turkish Agricultral Trade. Intrenational Journal of Human and Social Sciences.1 (2).70-82.

[10] Goldestein, M & Khan, M. (1978).The Supply and Demand For Exports: A Simultaneous Approach. Review of Economic Research. Massachusetts Avenue Cambridge. 60. 275-286.

[11] Greenaway, D & Milner, C.R. (1993).Trade and Industrial Policy in Develoing Countries.London, Macmillan, Business and Economics.

[12] Hasanov, Fakhri. (2010). The Impact of Real Effective Exchange Rate on The Non-oil Export: The Case of Azerbaijan. Institute For Scientific Research on Economoc Development of The Republic of Azerbaijan.

[13] Ilir, Vika. (2008). Measuring Import and Export Functions in Albania. Ecinimic Bulletin, Bank of Albani.11 (3).109-112.

[14] Khan, Mohsin. (1974). Import and Export Demand In Developing Countries. IMF Staff Paper.21 (3).389-413.

[15] Mahdavian, M.H. (1990).Analytical Methods of Exchange Rate.Center Bank of The Islamic Republic of Iran. Monetary and Banking Research Institute.(In Persian).

[16] Piraste, H & Sameti, M. (2002).Analysis on The Factors Affecting on The Export of Industrial Goods. Econimic Research and Policy.9 (20).3-24. (In Persian).

[17] Rahimi Brojerdi, A.R. (1999).The Impact of New Currency Policy on Irans Foreign Trade.Journal of Economic Research.53. 57-86. (In Persian).

[18] Rahim Brojerdi, A.R. (2001).Optimum Exchange Regime and the Behavior of Real Exchange Rate in the Models of International Finance.Monetry and Banking Research Academy, Center Bank of The Islamic Republic of Iran. (In Persian).

[19] Sadeghi, H & Sahabi, B & Shure Kandi, A.A. (2012).Effect of Exchange Rate on Non-oil Exports to The Selected Countries of Middle East. Economic Research.11 (1).81-100.

[20] Salvatore, Dominick. (2000). InternationalEconomics(2). Translated by Arbab, Hamid Reza.PublisheedbyNeyPablication.(In Persian).

[21] Shakeri, A. (2005).Presents A Model of Non-oil Exports of Iran.Economic Research of Iran. 22. 23-50. (In Persian).

[22] Sjusted, L.A & Clements, K.W. (1981).The Incidance of Protection: Theory and Measurement.The Free Trede Movement in Latin America.

[23] Classification of Economic Activities in Iran Based on (ISIC, Rev, 3,1). (2011). Statistical Center of Iran. (In Persian).

[24] Taheri Farrd, E. (2005).Currency Role In The Development of Non-oil Exports of Iran. Journal of Planning and Budget.89. 47-79. (In Persian).

[25] Tayebi S.K & Mesri Nezhad, Sh. (2003).Evaluation of Short-term and Long-term Interactive Relationship Between Inflation and The Supply of Non-oil Export of iran.Journal of Econoic Research. 61. 1-23.(In Persian).