Study of Exchange Market Pressure and the Central Bank’s Direct Intervention in Exchange Market in Periods of Shortage and Abundance of Oil Revenues

The purpose of this study is to investigate the situation of foreign exchange market pressure and the effect of domestic and foreign variables on it and to investigate the direct intervention of the central bank in the foreign exchange market in two periods of shortage and abundance in oil revenue. For this purpose, using the VECM and quarterly data of Iran-US economy from 1990.1 to 2017.4, exchange market pressure index and central bank direct intervention index were calculated and the manner of the direct intervention of the central bank in each season in the foreign exchange market was determined. Then, using the VAR model, the effect of domestic and foreign variables on the exchange market pressure index was investigated. The results show that firstly, the predominant situation of the foreign exchange market in the period of shortage in oil revenue is appreciation in the exchange rate, and in the period of abundance in oil revenue is depreciation in the exchange rate. Secondly, the Central Bank has tried to reduce the supply surplus created in the foreign exchange market and prevent the exchange rate from depreciating during the period of abundance in oil revenues by leaning against the wind interventions and purchasing foreign exchange. Third, in the period of abundance in oil revenue compared to the period of shortage in oil revenue, the relationship among the factors affecting exchange rate fluctuations and the exchange market pressure index has decreased. Therefore, the exchange rate is expected to jump in the long run.