Faculty of Administrative Sciences and Economics, Shahid Ashrafi Esfahani University, Esfahan, Iran.
Faculty of Economics, University of Esfahan, Esfahan, Iran.
he exchange rate is always interacting with internal and external variables of economy. So the relationship between the exchange rate volatility and the trade flows is one of the considerable issues in international economics. The increase and decrease of the exchange rate volatility create different effects on trade flows. The main objective of this paper is to study the symmetric and asymmetric effects of exchange rate volatility on industrial trade flows in Iran. In this paper, the symmetric and asymmetric effects of exchange rate volatility on Iran’s export and import industries (i.e. 9 industries exporting to China and 12 industries importing from China) are estimated over the period 1992-2016. Linear ARDL is used to evaluate the symmetric effects, and nonlinear ARDL approach is used to study the asymmetric effects. Results show that out of the 21 industries, almost half of the import and export industries have asymmetric effects of exchange rate volatility. Also, based on the results, the asymmetric effects vary by industry. Most of the investigated industries in this study use the exchange rate volatility as a factor for profitability and, despite volatility in exchange rates, increase their business. Therefore, this study is confirmed in most of the approved surveyed industries, where the risk theory is a portfolio.