The Impact of Natural Gas Price Changes on the Dynamics of Iran's Real Exchange Rate and Trade Balance: An Application of the SVAR Model

Document Type : Original Article

Authors

1 Ph.D. in Economics, Department of Economics, Faculty of Economic and Administrative Sciences, Mazandaran of University, Babolsar, Iran

2 M.A. in Economics, Department of Economics, Faculty of Economic and Administrative Sciences, Mazandaran of University, Babolsar, Iran

3 Assistant Professor, Department of Management, Economics and Accounting, Faculty of Humanities and Social Sciences, Golestan University, Gorgan, Iran

Abstract

This study examines the impact of gas price changes on Iran's exchange rate and current account balance from 1380 to 1400 using an SVAR model. The results indicate that gas prices have a significant negative effect on the exchange rate. Regarding the impact on the current account balance, although the coefficient of gas prices in the current account equation is negative, this effect is not statistically significant. Additionally gas prices have significant positive effect on production. Based on the results of impulse response functions, the exchange rate rises in response to a gas price shock in the short term, and this effect remains stable over time. The current account balance initially decreases, but the negative effect of the gas price shock is adjusted in subsequent periods, indicating a temporary impact on the current account balance. Finally, the gas price shock initially has a negative effect on GDP, but from the third period onward, this effect becomes positive, leading to increased production. Variance decomposition results show that the impact of gas price shocks on the exchange rate, current account balance, and GDP grows over time, with these shocks explaining nearly half of the variance in these variables by the tenth period.

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References

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History

  • Receive Date: 10 November 2024
  • Revise Date: 01 February 2025
  • Accept Date: 01 February 2025
  • Publish Date: 21 March 2025

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