The Effect of Exchange Rate Fluctuations on the Value Added of Industrial Sector by Use of Purching Power Parity (Crumm Index)

Fluctuation of exchange rate and its deviation from equilibrium path are one of the most important macroeconomic variables that is affected by different side of economic sectors. Whereas, the Exchange rate fluctuation and its deviation from equilibrium path haven’t the same and similar effects on all of the economic sectors, and considering eminent importance of industrial development on the development of the country; This paper examines and evaluates the exchange rate fluctuation and its deviation from equilibrium path on value added of industrial sectors. So first we calculate deviation of real exchange rate from long run equilibrium path by use of purching power parity (Crumm index) Then, in order to calculate short run exchange rate flactuation, In order to avoid non stationery of some of the variables used in these models, and other problems, we have used a new econometric method; integrated auto regressive distribution lag (ARDL); and then considered the effects of exchange rate fluctuations and its deviation from equilibrium path on value added of industrial sectors by use of model. This paper shows that fundamental hypothesis; posteriori reverse relationship between real exchange rate deviation of equilibrium path and value added of industrial sectors; confirmed in model. Besides every equation, present the reverse relationship between short run exchange rate fluctuation and value added of industrial sectors.