Investigating the interactive effects of oil revenues fluctuations and severe economic sanctions on exchange rate volatility in Iran: ARDL-EGARCH approach

اقتصاد پولی مالی

Volume 31, Issue 2 - Serial Number 28, September 2025

Document Type: Original Article

DOI: 10.22067/mfe.2024.86163.1373

Authors

hojjat izadkhasti^* ; Farnaz Mirramazani

Master of Economics, Faculty of Economics and Political Science, Shahid Beheshti University, Tehran, Iran

Abstract

Exchange rate volatility through instability in the economy causes uncertainty in the economy at the macro level and decision-making and planning of economic factors face a crisis. Also, the exchange rate is affected by several factors and the requirement for managing exchange rate volatility is to identify the factors that cause it. Given the special conditions of the Iranian economy and the intensification of economic sanctions in the last decade and the dependence of the government budget on oil revenues, it is important to examine the impact of oil revenues and the growth of the budget deficit on the exchange rate volatility under severe sanctions. The main purpose of this study is to investigate the interactive effects of oil revenues fluctuations and severe economic sanction on exchange rate volatility using quarterly data in the period (1996-2021) and the combined method of Autoregressive Distributed Lag and Exponential Generalized Autoregressive Conditional heteroskedasticity (ARDL-EGARCH) in Iran. The results show that oil revenues fluctuations and budget deficit growth have positive impacts on exchange rate volatility. Also severe economic sanctions have indirectly increased exchange rate volatility by affecting fluctuations of oil revenues. Economic growth has reduced exchange rate volatility.

Keywords

Sanctions; Exchange rate volatility; Budget deficit; Oil revenue fluctuations; Iran

References