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:: year 13, Issue 46 (2-2021) ::
JMBR 2021, 13(46): 631-670 Back to browse issues page
Evaluation of The Existence of Intrinsic Bubbles in The Non-Official Exchange Rate
Ali Taiebnia 1, Azadeh Akhtari1, Mohsen Mehrara1
1- Faculty of Economics, University of Tehran
Abstract:   (123 Views)
The purpose of this paper is to investigate the existence of intrinsic bubbles in the non-official exchange rate of the USD/IRR and the causes of these bubbles and determine the intervals of their occurrence, to adopt appropriate policies at the macro level to reduce these bubbles. Intrinsic (endogenous) bubbles are developed by creating expectations that the foreign currency will be valuable in future periods relative to other assets and overvaluing the foreign currency in this period, due to changes in the fundamental factor affecting the exchange rate. Speculation bubbles, which are based on expectations of an increase in the exchange rate and are formed by the increase in demand for foreign currency in this period, with the motivation of making a profit in future periods, are quite different.
From a methodological point of view, there is an intrinsic bubble when the estimated non-official fundamental exchange rate and the estimated non-official exchange rate with the Froot and Obstfeld method (1991) don’t match. The findings of this paper indicate that in the period from June 2015 to the end of March 2016, there was an intrinsic bubble in the non-official exchange rate. The source of the positive intrinsic bubble in this period was the decline in oil revenues due to the negative bubble in oil prices from 2014 to 2016. Also, from February 2018 to September 2018, a positive intrinsic bubble was observed in the non-official exchange rate. The reason for the intrinsic bubble of this period was not the decline in oil revenues. Rather, the budget deficit due to the non-realization of a part of government revenues and the supply of selling cheap gold coins, which led to the entry of liquidity into the foreign exchange market, fears of a sharp decline in oil exporting revenues due to comprehensive US sanctions and implementation of currency control policy in April 2018, which led to the successive failure of the resistance levels of USD and the creation of a cautious demand for the dollar has been the source of this bubble. But when the two rates coincide, there is no intrinsic bubble. In this case, in periods such as January 2012 to March 2012, September 2012 to November 2012, and February 2013 to March 2013, when the requirements of the rational speculation bubble are met, there is a speculation bubble caused by oil and banking sanctions.
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Type of Study: Empirical Study | Subject: Money and Interest Rates (E4)
Received: 2021/01/13 | Accepted: 2021/05/17 | Published: 2021/09/28
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year 13, Issue 46 (2-2021) Back to browse issues page
فصلنامه پژوهش‌های پولی-بانکی Journal of Monetary & Banking Research
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