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

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 workThere 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. 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. 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.