Comparison of Asymmetric Effects of Exchange Rate Fluctuations on Iran's Trade Balance with Germany and Turkey

The effect of exchange rate fluctuations on foreign trade has always been the focus of economists and economic policymakers. It should be noted that different and sometimes contradictory theories and conclusions have been raised. This study examined the effect of exchange rate fluctuations on Iran's trade balance with Germany and Turkey. The results have been reviewed and compared. These results using NARDL model show the long-run relationship and the asymmetric effects of exchange rate fluctuations on Iran's trade balance with respect to both countries. The J curve has been approved in relation to Turkey, but this phenomenon is not confirmed in relation to Germany. Therefore, considering the economic conditions of Iran, the devaluation policy alone cannot be considered as a policy to improve the balance of trade. The dependence of the domestic sector on the import of primary goods and final products and the low elasticity of non-oil imports and exports are the problems which need to be addressed in economic policies.