Investigation of Currency Crises Incidence in the Iranian Economy

Document Type : Research Paper


1 Associate Professor, Tarbiat Modares University, Department of Economics, Tehran, Iran

2 Professor, Buali Sina University, Department of Economics, Hamedan, Iran


One of the major problems in the international monetary system is the frequent occurrence of currency crises in different countries. Considering the high cost of currency crises on the economies, designing models for exploring the costs and incidence manner of such crises in the economy can be important. So, we attempted to investigate the implied costs of currency crises and the manner of the crises incidence in the Iranian economy, using bounds testing approach, quarterly data of the Iranian economy during the period 1988:02-2016:02 and an early warning model with a continuous dependent variable. Based on the results, on the one hand, the increase in the ratio of central bank claims on the government to the monetary base and the ratio of central bank claims on the banks to the monetary base, and on the other hands, the decline in the industrial production growth, the growth of oil export earnings, the ratio of earnings from oil exports to foreign assets of the central bank and the ratio of loans to banks' deposits have had resonator effects on the incidence of currency crises in the Iranian economy. Also,  oil and banking comprehensive sanctions from the third quarter of 2012 has led to a significant increase of currency crises incidence in the Iranian economy. Under these circumstances, policymakers, through strengthening foreign exchange earnings and resources and diversifying the sources of foreign exchange, supporting the increase in industrial production, controlling the share of central bank claims on government and banks in the monetary base, and also helping to increase the ability to pay loans and improving the performance of the lending system of banks, can help to prevent the possible occurrence of currency crises and the incidence of such crises in the economy.


Main Subjects

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