The estimation of exchange rate of (IRR-Dollars) based on Purchasing Power Parity and Monetary Approach

Subject Areas : Applied Economics

مهدی تقوی ¹ , مهدیه مرادی ²

1 - ندارد
2 - مسئول مکاتبات

Received: 2011-06-26 Accepted : 2011-11-15 Published : 2012-06-21

Keywords: exchange rate, Prediction, Auto Regressive Distributed La,

Abstract :

This research is an estimation of the exchange rate between the US Dollar and the Iranian Rial, for the period between 1352 and 1387. Using ARDL method for hypothesis testing, and selecting the optimal model, the Mean Square Error (MSE) and Root Mean Square Error (RMSE) are used to test our hypothesis. The selection of the optimal model for prediction is based on the Purchasing Power Parity (PPP) theory and the Monetary Approach to Balance of Payment. The results of this study indicate that the PPP model is a more accurate indicator of the exchange rate, and is therefore preferred to the monetary approach.