The Impact of Iran Oil Sanctions on the Exchange Rates: An Analysis Using Google Search Index


1 Department of Economics, University of Isfahan, Isfahan, Iran.

2 Department of Economics, Faculty of Law and Humanities, Isfahan (Khorasgan) Branch, Azad University, Isfahan, Iran.

3 Department of Energy Economics, Tehran Faculty Petroleum, Petroleum University of Technology, Khuzestan, Iran.


Iran has faced oil and banking sanctions mainly under the pretext of nuclear programs, since 2012. Following the sanctions and instability of the exchange rates in Iran, the Rial has sharply lost its value. Rising economic unrest has widened the gap between the official exchange rate and parallel market rate. However, the depreciation of Iran’s Rial does not show a uniform trend, and the decline path has been complicated. We know that sanctions against Iran have created new expectations, concerns, and attentions. The Google Trends has provided an analytic tool for measuring and monitoring people’s expectations based on their Internet search data. For the first time, this study attempted to analyze and model the exchange rate trends in Iran using sanctions-related expectations extracted from the Google Trends. The Google search index (GSI) of the sanctions demonstrated the agent’s expectations and severity of sanctions during the period. Monthly data and the autoregressive distributed lag (ARDL) method were used for estimation. The results indicated a significant and positive impact of GSI on the unofficial exchange rate (UER) and just positive impact on real unofficial exchange rate (RUER). We can conclude that the effects of sanctions appear partly through changes in people’s expectations that can be extracted using GSI. Moreover, the difference in inflation showed a significant positive effect on the market exchange rate in Iran. Thus, an improvement in the expectations through reducing the international tensions and a perspective shift can strengthen the Rial exchange rate. Moreover, the policy maker can control the volatility and depreciation of the exchange rates in Iran by restricting the liquidity growth through an appropriate long-run monetary policy.