The Effect of Exchange Rate Uncertainty on Import with TARCH Approach

Subject Areas : General Management

Teimour Mohammadi ¹ , Mehdi Taghavi ² , Abolghasem Bandidarian ³

1 - Department of Economics, School of Management and Economics, Science and Research Branch, Islamic Azad University (IAU), Tehran, Iran
2 - Department of Economics, School of Management and Economics, Science and Research Branch, Islamic Azad University (IAU), Tehran, Iran
3 - Department of Business Management, School of Management and Economics, Science and Research Branch, Islamic Azad University (IAU), Tehran, Iran

Received: 2012-02-16 Accepted : 2012-02-16 Published : 2012-02-16

Keywords: Uncertainty, real exchange rate, Real national income, Real import, TARCH,

Abstract :

This paper investigates the effect of exchange rate uncertainty on the Iran’s import trade. The exchange rate ‎uncertainty series were generated utilizing the TARCH model. This model analyzes the asymmetric effects. The analysis of uncertainty and asymmetry ‎of the exchange rate shows significant TARCH ‎effect on Iran’s exchange rates‎. The findings of the study indicatenegative shocks (bad news) had greater impact on volatility during the period. In the next stage imports demand function is estimated. There was a long run relationship among, real import ‎demand, real national income, real exchange rate and uncertainty of real exchange rate. Results show significant ‎and negative impact of exchange rate uncertainty on Iran’s imports, and import demand is positively affected by ‎real national income. Furthermore significant and negative impact of real exchange rate on Iran’s real imports is ‎found.‎