The Effect of Real Effective Exchange Rate and Its Uncertainty on Value Added of Iran's Industrial Sector

The real effective exchange rate and its uncertainty are among the most important macroeconomic variables that affect different economic sectors from various aspects. Since the changes in exchange rate have no identical impacts on all sectors of the economy and regarding considerable importance of industrial development on economic development, this study examines and evaluates the effects of real effective of exchange rate and its uncertainty on the value-added of industrial subsectors based on the two-digit codes ISIC-REV4 using Panel data and Engel-Granger methods during 1979-2014. The results show that the real effective exchange rate is of different effects on various subsectors of the industry while its uncertainty has no effect on sub-sectors’ value-added. Consequently, there is no single exchange rate policy in industrial sector due to different foreign exchange requirements in its subsectors.