Investigating the Factors Affecting Iran's Real Exchange Rate according to Selected Indicators of Sixth Development Plan Using the Vector Error Correction Model

Recognizing the effective factors in the formation and fluctuations of the exchange rate in the long run, as well as knowing how the exchange rate influents from economic policies to align with the desired goals are among the necessities of a successful economic plan. Accordingly, this study investigates the long-term and short-term factors affecting the real exchange rate of Iran and estimates the coefficients of the relevant variables using the vector error correction model (VECM) in the framework of behavioral equilibrium exchange rate model (BEER). Monitoring the trend of deviation of the actual real exchange rate from the long-term equilibrium exchange rate during the years 1973-2017, according to the selected quantitative goals of the Sixth Economic Development Plan of Iran, the real exchange rate and the equilibrium exchange rate of the country has been estimated during. The results of this study show that due to the failure to achieve the goals in the first three years of the Sixth Plan, the nominal exchange rate gap from the equilibrium exchange rate has reached an average of about 25 percent annually. In addition, the pressure of monetary inflation, reduced production growth and increased systemic risk of the country has led to a continuous increase in the nominal exchange rate in the parallel market.