Hostname: page-component-7bb8b95d7b-nptnm Total loading time: 0 Render date: 2024-09-12T12:04:56.080Z Has data issue: false hasContentIssue false
  • English
  • Français

The Iranian Foreign Exchange Policy And The Black Market for Dollars

Published online by Cambridge University Press:  29 January 2009

M. Hashem Pesaran
Get access Rights & Permissions [Opens in a new window]

Abstract

As a result of the oil price shocks, the 1979 revolution, and the eight-year war with Iraq, fundamental changes have taken place in Iran's foreign exchange position as well as in its exchange rate policy. The viable data over the period 1979–1980 to 1988–1989 clearly show that, despite the revolutionary rhetoric, very little has been done to reduce the country's dependence on oil exports as a source of foreign exchange and government revenues. Instead, in the face of falling oil revenues and the country's increasing international isolation, coupled with the regime's unwillingness to incur foreign debt, the government has adopted a severe ‘import compression’ policy through selective tariffs and quotas, strict control of private and government imports by means of import licenses, and the imposition of foreign exchange allocations on government agencies. The result has been an ever-rising premium on the U.S. dollar in the ‘black’ market, a highly overvalued official exchange rate, a substantial increase in rent-seeking activities at the expense of production, a severe misallocation of resources, and loss of output and industrial capacity.

Type
Articles
Information
International Journal of Middle East Studies , Volume 24 , Issue 1 , February 1992 , pp. 101 - 125
Copyright
Copyright © Cambridge University Press 1992

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCE

Amirahmadi, , Hooshang, (1988). ‘War Damage and Reconstruction in the Islamic Republic of Iran’ in Amirahmadi, H. and Parvin, M., eds., Post-Revolutionary Iran, pp. 126–49. Boulder & London;Westview Press.Google Scholar
Behdad, , Sohrab, (1988). ‘Foreign Exchange Gap, Structural Constraints and the Political Economy of Exchange Rate Determination in Iran,’ International Journal of Middle East Studies 20:1–21.CrossRefGoogle Scholar
Bhagwati, , Jagdish, N. (1982). ‘Directly Unproductive, Profit-seeking (DUP) Activities,’ Journal of po- litical Economy 90:988–1002.CrossRefGoogle Scholar
Blejer, , Mario, (1978). ‘Exchange Restrictions and the Monetary Approach to the Exchange Rate,’ in Jacob, Frenkel and Harry, Johnson, eds., The Economics of Exchange Rates, pp. 117–28. Reading, PA: Addison-WesleyGoogle Scholar
Clawson, , Patrick, and Cyrus, Sassanpour (1987). ‘Adjustment to a Foreign Exchange Shock: Iran, 1951–1953,’ International Journal of Middle East Studies 19:1–22.CrossRefGoogle Scholar
Dornbusch, , Rudiger, (1986). ‘Special Exchange Rates for Capital Account Transactions,’ The World Bank Economic Review 1:3–33.CrossRefGoogle Scholar
Dornbusch, , Rudiger, , Daniel, Valente Dantas, Clarice, Pechman, Roberto, de Resenze Rocha and Demetrio, Simoes (1983). ‘The Black Market for Dollars in Brazil,’ The Quarterly Journal of Economics 98:25–40.CrossRefGoogle Scholar
Edwards, , Sebastian, (1989). Real Exchange Rates, Devaluation, and Adjustment: Exchange Rate Policy in Developing Countries. Cambridge, Mass.: MIT Press.Google Scholar
Edwards, , Sebastian, and van Wijnbergen, S. (1989). ‘Disequilibrium and Structural Adjustment,’ in Hollis, Cheneray and Srinivasan, T. N., eds., Handbook of Development Economics, Volume II, pp. 1481–533. Amsterdam: North Holland.CrossRefGoogle Scholar
Gupta, , Sanjeev, (1980). ‘An Application of the Monetary Approach to Black Market Exchange Rates,’ Weltwirtschaftliches Archiv 2:235–51.CrossRefGoogle Scholar
Krueger, , Anne, O. (1974). “The Political Economy of the Rent-Seeking Society,” The American Economic Review 64:291–303.Google Scholar
Lautenschlager, , Wolfgang, (1986).‘The Effects of An Overvalued Exchange Rate on the Iranian Economy. 1979–1984,’ International Journal of Middle East Studies 18:31–52.CrossRefGoogle Scholar
Lizondo, José Saúl (1987a). ‘Exchange Rate Differential and Balance of Payments Under Dual Exchange Markets,’ Journal of Development Economics 27:37–53.CrossRefGoogle Scholar
Lizondo, , José, Saúl (1987b). ‘Unification of Dual Exchange Markets,’ Journal of International Economics 22:55–77.Google Scholar
Mahdavy, , Hossein, (1970). ‘Patterns and Problems of Economic Development in Rentier States: The Case of Iran,’ in Cook, M. A., ed., Studies in the Economic History of the Middle East, pp. 428- 67. Oxford: Oxford University Press.Google Scholar
Olgun, , Hasan, (1984). ‘An Analysis of the Black Market Exchange Rate in a Developing Economy— The Case of Turkey,’ Weltwirtschaftliches Archiv 2:229–347.Google Scholar
Pesaran, M. Hashem (1976). World Economic Prospects and the Iranian Economy. The Institute for International Political and Economic Studies, Teheran Paper No. 5. (in Persian and in English).Google Scholar
Pesaran, M. Hashem. (1982). ‘The System of Development Capitalism in Pre- and Post-Revolutionary Iran,’ International Journal of Middle East Studies 14:501–22.CrossRefGoogle Scholar
Pesaran, M. Hashem. (1984). ‘Macroeconomic Policy in an Oil-Exporting Economy with Foreign Exchange Controls,’ Economica 51:253–70.CrossRefGoogle Scholar
Pesaran, M. Hashem. (1985). ‘Economic Development and Revolutionary Upheavals in Iran,’ in Afshar, Haleh, ed., Iran: A Revolution in Turmoil, pp. 15–50. London: Macmillan.CrossRefGoogle Scholar
Pesaran, M. Hashem and Bahram, Pesaran (1989). Microfit: An Interactive Econometric Software Package. Oxford:Oxford University Press.Google Scholar
Pinto, , Brian, (1990). ‘Black Market Premia, Exchange Rate Unification, and Inflation in Sub-Saharan Africa,’ The World Bank Economic Review 3:321–38.CrossRefGoogle Scholar