Spillover Effects of Selected Macroeconomic Variables on Exchange Market Pressure: a VAR-DCC-GARCH Approach

Document Type : Original Article

Authors

1 Assistant Professor in Economics, Bozorgmehr University of Qaenat, ,Qaen, Iran.

2 Assistant Professor in Economics, Bozorgmehr University of Qaenat,, Qaen, Iran

Abstract

Exchange rate market play an important role as a measure to deal with monetary and currency crises and control its effects on the economy. The purpose of this study is to investigate the relationship between exchange market pressure, inflation rate, oil price and economic uncertainty in Iran using the VAR-DCC-GARCH model during the period of the first quarter of 1991 to the third quarter of 2021. Based on the results of the research, there is a dynamic conditional correlation between the variables, and volatilities of the inflation rate, oil price and economic uncertainty index lead to volatilities of the exchange market pressure. Also, the spillover effect of inflation rate, oil price and economic uncertainty index on exchange market pressure is positive and significant, which shows the important influence of these variables on exchange market pressure. Therefore, according to the correlation structure between the exchange market pressure and the macroeconomic variables, it is possible to control the effects of macroeconomic variables on the currency market by implementing appropriate policies in line with economic stability.

Keywords

References

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