Investigating the impact of exchange rate and oil price fluctuations on Iran’s steel exports to China with sanctions in focus: A wavelet and multivariate-GARCH approach

Considering Iran's potential in steel production and exports, attention to its exports contributes to reducing the country’s dependence on oil revenues. Hence, the purpose of this study is to investigate the effect of exchange rate and oil prices on Iran’s steel exports to China in the period between February 2008 and March 2019 using the wavelet and multivariate-GARCH approaches. The results of the wavelet model showed that increasing in sanctions in the early 2010s and their intensification during 2018 and 2019 has intensified the impact of exchange rate on Iran's steel exports to China. Also, during the period 2013 to 2015, with the prolongation of the negotiation process and changes in world oil prices, the correlation between world oil prices and Iran's steel exports to China has intensified in the long run. The results of multivariate GARCH show that the correlation between the real exchange rate and Iran's steel exports to China has been negative for most of the period. Moreover, the correlation between the real exchange rate and oil prices has been positive for most of the period under study. Therefore, it can be said that steel is one of Iran's export commodities which increases its non-oil export revenues as oil prices and revenues increase.