The Impacts of Oil Revenues on the Exchange Rate Using the FMOLS Method: Case study IRAN

The exchange rate in Iran’s economy, is one of the most critical indicators influencing fiscal, trade, and monetary policymaking. Given that a substantial portion of the country’s foreign exchange earnings is dependent on crude oil exports, any fluctuations in oil revenues can directly or indirectly affect the exchange rate. This relationship becomes especially significant under circumstances such as international sanctions, global oil price volatility, and the structural dependency of the government budget on oil revenues. Consequently, a precise understanding of the mechanisms by which oil income influences the exchange rate is essential for designing sustainable currency policies and ensuring the country’s macroeconomic stability. The present study investigates the long-term relationship between oil revenues and the exchange rate in Iran during the years ۲۰۰۲ to ۲۰۲۴, utilizing the Fully Modified Ordinary Least Squares (FMOLS) econometric method. Through the analysis of quarterly time series data and unit root tests, the stationarity and then cointegration of the variables were examined. The test results indicate that the variables are integrated of order one, and a cointegration relationship exists among them, justifying the estimation of the model using FMOLS.The findings reveal that, according to the model estimates, oil revenues and non-oil exports exert a significant negative effect on the exchange rate. Specifically, a one-percent increase in oil revenues leads to a ۰.۴۱ percent decrease in the exchange rate (signifying an appreciation of the Rial), while an increase in non-oil exports results in a ۰.۷۲ percent decrease in the exchange rate.

کلیدواژه ها:

oil revenues ، Exchange rate ، FMOLS ، Non-Oil Exports ، Global Oil Price