Currency shocks and dollarization of Iranian economy

Document Type : Research Article



Iranian economy in recent years has experienced several currency shocks; on the other hand, slight changesin dollarization would cause huge exchange rate movements. In this paper, using “Autoregressive Distributed Lag Method” (ARDL), the money demand function is estimated to check the dollarization of the Iranian economy. Then, the volume of “Foreign Currency Deposits” (FCD) in the banking system, using Kamin and Erickson (2003) method has calculated and we get to dollarization index. The results show that the Iranian economy is dollarized and the dollarization Index in 1390 and 1391 is respectively 0.77 and 0.81.