Estimation of Permanent Equilibrium Exchange Rate in Iran

This article examines factors that affect the Real Permanent Equilibrium Exchange Rate and determines the degree of deviation of the informal market exchange rate from it. For this study, a Dynamic Ordinary Least Square Model is applied for the period of 1369Q:1-1399Q:4. According to the research findings, increasing net ratio of foreign assets of the central bank to production, productivity and also the ratio of trade surplus to production, lead to a decrease in the real Permanent Equilibrium Exchange Rate and increasing ratio of expenditures government to production leads to an increase in it. Also, calculations show that since 1397, the upward trend of the Permanent Equilibrium Exchange Rate has started and since then until the end of 1399, the currency deviation in the country has always been positive. One of the most critical seasons in this period was the third quarter of 1399, in which the currency deviation has exceeded 32%. According to the forecasts made based on the estimated model, with the scenario of the continuation of the current situation, the equilibrium exchange rate of the summer of 1400 has been estimated at more than 25 thousand Tomans.