Exchange Rate, Tradable and Non- Tradable Goods, Consumer Preferences JEL Classification: F31, C22, E44

Subject Areas : International Economics

Alireza Nadali ¹ , Saleh Ghavidel ^{2 *} , Parveneh Salatin ³ , Abdolreza Talaneh ⁴

1 - Ph.D. Student, Department of Economics, Fi. C., Islamic Azad University, Firuzkuh, Iran, [e-mail]
2 - Department of Economics, Fi. C., Islamic Azad University, Firuzkuh, Iran (Crossponding Authur), [e-mail]
3 - Department of Economics, Fi. C., Islamic Azad University, Firuzkuh, Iran, [e-mail]
4 - Department of Accounting, Fi. C., Islamic Azad University, Firuzkuh, Iran, [e-mail]

Received: 2025-02-03 Accepted : 2025-03-24 Published : 2025-05-17

Keywords: Exchange Rate, Tradable and Non- Tradable Goods, Consumer Preferences JEL Classification: F31, C22, E44,

Abstract :

TThis study aims to calculate Iran's real trade exchange rate and analyze the role of consumer preferences in its long-term trend from 1960 to 2020. The real trade exchange rate was calculated based on relative supply and demand, differing from the overall real exchange rate. The Kalman and Hodrick-Prescott filters were used to eliminate short-term fluctuations and assess the long-term trend, revealing a real trade exchange rate decline. The shift in consumer preferences from domestically produced goods to imported products has significantly contributed to this decline. The decrease in demand for domestic goods, combined with an increase in demand for imports, has shifted supply and demand dynamics in the foreign exchange market, leading to a rise in foreign currency values and a weakening of the national currency. Factors such as lower quality and higher prices of domestic products compared to imports have driven this preference for foreign goods. Furthermore, while the real trade exchange rate declined, the real exchange rate for the overall economy showed an upward trend, suggesting the presence of Dutch disease in Iran's economy..

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