Examining the Efficiency of the Foreign Exchange Market in Iran with a Random Walk Approach

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Article Type:
Research/Original Article (دارای رتبه معتبر)
Abstract:
The efficiency of the foreign exchange market is crucial because exchange rates play a vital role in balancing a nation's internal and external economies. Iran's foreign exchange market has undergone significant developments and fluctuations in recent years, impacting its efficiency. This is evident in the monthly time series data for the unofficial exchange rates of the dollar, euro, and yuan from 2001 to 2021. An interesting trend has emerged since 2017: the Chinese yuan appears to be gradually replacing the dollar and euro as the primary trading currency in Iran's international market. Statistical tests, including the Augmented Dickey-Fuller (ADF), Phillips-Peron (PP), and KPSS tests, indicate weak-form efficiency in the markets for all three currencies (dollar, euro, and yuan). This suggests that these markets remain vulnerable to speculative attacks. Furthermore, Johansen's cointegration and Granger's causality tests reveal an absence of semi-strong efficiency in all three markets. This implies that past price information alone is insufficient to predict future exchange rates. The research findings suggest that choosing the yuan as an alternative currency has had a somewhat positive impact on improving the efficiency of the Iranian currency market.
Language:
Persian
Published:
Journal of Program and Development Research, Volume:4 Issue: 4, 2024
Pages:
43 to 76
https://www.magiran.com/p2735001  
سامانه نویسندگان
  • Fadaee، Mahdi
    Author (2)
    Fadaee, Mahdi
    Assistant Professor Economics,
  • Shahabadi، Abolfazl
    Author (3)
    Shahabadi, Abolfazl
    Professor Professor, Department of Economics, Faculty of Social Science and Economics, Alzahra University, University Of Alzahra, تهران, Iran
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