Pathology of Recent Exchange Rate Fluctuations: With Emphasis on Trade Sector

Reviewing foreign exchange policies during past decade implies a highly managed floating exchange rate policy which wasn’t necessarily accord with adopted monetary and fiscal policies of the government. These policies led to a long time stabilized exchange rate following by overshooting of exchange rate. Although this situation has mainly caused by inefficient monetary، fiscal and foreign exchange policies but some international political tensions especially sanction also had their own roles. In this article we are to discuss potential threats and opportunities of this phenomenon and its effects. The results imply that overshooting of exchange rate has had some negative impact such as: imposing a higher inflation regime، stimulating inflation expectation of the economic agents، dollarization of the economy and etc. On the other hand as long as national currency depreciation hasn’t been absorbed by other national economic sectors، it not only could not improve trade balance significantly، but led to great increase in price level and also some negative phenomena such as export smuggling