Asymmetric Effect of Positive and Negative Exchange Rate Fluctuations on Investment in Iran's Transportation Sector

Considering the importance of expanding the transportation network and its role in the economy, investment in this sector plays an important role in the growth and prosperity of the country's economy. One of the factors influencing investment in the transportation sector is the exchange rate. To investigate the exchange rate shocks, initially, using Hodrick-Prescott filter, predicted shocks and unexpected positive and negative shocks have been extracted. Further, in specifying the investment equation in the transportation sector, in addition to these shocks, the effect of other variables such as the added value of the transportation sector and the interest rate have been examined. For this purpose, using the auto-regressive distributed lag method (ARDL) as well as the error correction model (ECM), the long-term and short-term relationship between investment in the transportation sector and the factors affecting it during the years 1370-1999 has been evaluated. The results of estimating the short-term and long-term coefficients show that the added value of the transportation sector has a positive effect on the investment in the transportation sector, and the interest rate has a negative effect on the investment in the transportation sector. Also, the results show that the expected exchange rate shocks in the short and long term have a positive effect on investment in the transportation sector. In addition, unexpected positive exchange rate shocks also have a negative effect on investment in the transportation sector, and negative exchange rate shocks also have a positive effect on investment in the transportation sector in the long term.  Also, the results of the asymmetry test of positive and negative exchange rate shocks show that the exchange rate has asymmetric effects on investment in the transportation sector.