Impact of Asymmetric Changes of Real Effective Exchange Rate on Agricultural Value Added in Iran: NARDL Approach

Document Type : Research Paper

Authors

• sara ghobadi ¹
• shahbaz shamsoddini ²
• saeed daeekarimzade ³

¹ Department of economics, university of Isfahan Azad Islamic

² Chaharmahal and Bakhtiari Agricultural and Natural Resources Research and Education Center

³ Department of economics, university of Islamic Azad Isfahan

10.30495/jae.2023.24628.2157

Abstract

This study investigate the relationship between agricultural value added and real effective exchange rate shocks using the NARDL approach and seasonal data for the period 2009Q4 to 2017Q4 in Iran. The results of the bounds test indicate that there is a long-run equilibrium(co-integration) between variables and the estimation of the model shows that appreciation or depreciation in real effective exchange rate in the long run has a negative and significant effect on the value added of agricultural sector at 10 percent. Also, interest rate on banking facilities and government expenditures in agricultural sector had a negative and significant effect at 1 percent. The results of the Wald test indicate that in the short run, the effect of real effective exchange rate shocks on the agricultural value added is asymmetric and in the long run the effect of these shocks is symmetric. Both in the short run and in the long run, the appreciation in real effective exchange rate will have a greater impact on the value added of the agricultural sector compared with its depreciation.

Keywords

• Agricultural sector
• Bounds test
• Co-integration
• Exchange rate shocks

---

References

1- Abgoon O. Investigation of uncertainty effect of exchange rate changes on agricultural value added for 1978-2010 in Iran. Master thesis of Agricultural Economics. Faculty of Agriculture. University of Zabol.2013; pp:104. https://ganj.irandoc.ac.ir/#/articles/d702bf175ca6ba98268c7158cc5585f2

2- Adekunle W, Innocent N.C. The impact of exchange rate dynamics on agricultural output performance in Nigeria.2018; https://mpra.ub.uni- muenchen.de/87750/.

3- FAO.(2016). FAOSTAT. Available Online at: http://fao.org/faostat/en/#data/QC

4- Jamali Sh. Investigation of exchange rate changes effect on export and import of agricultural products. Master Thesis of Economics. Faculty of Economics. University of Allameh Mohades Nouri.2014; pp:63.https://ganj.irandoc.ac.ir/#/articles/bc1ed29e92397a2e82687028b8a8666b

5- MAJ. (2018). Available online at: http://amar,maj.ir

6- Ogunjimi J.A. Exchange rate dynamics and sectoral output in Nigeria: a symmetric and asymmetric approach. American Journal of Social Sciences and Humanities. 2020; 5(1): 178-195. http://onlinesciencepublishing.com/index.php/ajssh/article/view/179/249

7- Olowofeso O.E, Adeboye A.A, Adejo V.T, Bassey K.J, Abraham O. Agricultural sector credit and output relationship in Nigeria: evidence from nonlinear ARDL.CBN Journal of Applied Statistics.2017; 8(1): 101-122. https://www.cbn.gov.ng/out/2017/sd/agricultural%20sector%20credit%20and%20output%20relationship%20in%20nigeria_evidence%20from%20nonlinear%20ardl.pdf

8- Pesaran M.H, Shin Y, Smith R.J. Bounds testing approaches to the analysis of level relationships. Journal of Applied Economics. 2001; 16: 289-326. https://onlinelibrary.wiley.com/doi/epdf/10.1002/jae.616

9- Ramezani S. Effects of exchange rate changes on employment and value added of agricultural sector in Iran. Master Thesis of Economics. Faculty of Economics. University of Allameh Mohades Nouri. 2016; pp:85. https://ganj.irandoc.ac.ir/viewer/8d30d1aa81b25d23139abac5614d99ce

10- Ramoni-Perazzi  J, Romero H. Exchange rate volatility, corruption and economic growth. Heliyon 8(2022). https://doi.org/10.1016/j.heliyon.2022.e12328

11- Saha S. Do exchange rate changes have symmetric or asymmetric effects on stock prices? . Master Thesis for the Master of Philosophy in Economic Degree. Department of Economics. University of Wisconsin-Milwaukee. 2017; pp:117. https://dc.uwm.edu/cgi/viewcontent.cgi?article=2540&context=etd

12- Shin Y, Yu B, Greenwood-Nimmo M. Modeling asymmetric co-integration and dynamic multipliers in a nonlinear ARDL framework. R.C. Sickles and W.C. Horrace(eds). Festschrift in Honor of Peter Schmidt: Econometric Methods and Applications.https://link.springer.com/chapter/10.1007/978-1-4899-8008-3_9

13- Wang y, Yu H, Zhang H, Chen T. Non-linear analysis of effects of energy consumption on economic growth in China: Role of real exchange rate. Economic Modeling. 2021; 104: 105623. https://doi.org/10.1016/j.econmod.2021.105623