Monetary and Banking Research Institute
Date:11/2/2019 9:38:52 AM   |   Code : 314524   |   View: 34

A Research Report on How Exchange Rates Affect Prices has been Published

The research report of "How the Exchange Rate Affects Prices - An Analysis Based on Micro Data" was published by the Monetary and Banking Research Institute and is available to those interested.

According to the Public Relations Department of MBRI, the report, written by Sajad Ebrahimi, said: In recent years, shocks in the exchange rate have led to a significant increase in domestic prices and thus affect the performance of other sectors of the economy. Therefore, it is essential to examine how the exchange rate affects prices. But the reaction of all product prices to the exchange rate growth has not been the same.

In this report, using commodity price data of 2369 commodities published by 355 listed companies in Tehran Stock Exchange during 2005-2018, as well as using 734 commodity price index databases and services constituting the producer price index, the price response of companies to currency changes in two dimensions of speed and intensity were examined to evaluate which companies and products respond faster and more intensified to exchange rate changes.

The results of the sectoral analysis show that the products of the manufacturing sector and the transportation sector are the most affected by the exchange rate changes, and the other services sub-sectors (except the transportation) bear the least impact. Also, in the agricultural and manufacturing sectors, price changes caused by the currency shocks are performed with the lowest latency and higher speed, and prices in the transportation sector, education, and health and social work sectors are later adjusted.

Based on the results, import intensity, the higher foreign exchange consumption than foreign exchange resources, and the criterion of the dollar in imported purchases increase the impact of currency fluctuations on prices. On the other hand, government ownership, firm’s size, and the criterion of the dollar in export sales reduce the effects of exchange rate changes. Also, smaller firms with high financial constraints, intermediary producers (versus consumer and final goods), and firms with more foreign exchange resources raise their prices faster than exchange rate growth.


Those interested in accessing the full text of this research report can visit the Monetary and Banking Research Institute Portal at www.mbri.ac.ir

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