Economic sanctions are used as a tool in the foreign policy of some countries against other countries. Iran has been under the most severe economic sanctions for more than a decade. Countries that are targeted by economic sanctions face many issues and problems. The exchange rate is one of the important economic variables that is affected by various factors. Without a doubt, the exchange rate in each country is one of the basic indicators in determining the degree of international competitiveness and explaining the internal state of the economy of that country. Turbulence and fluctuation in the performance of this indicator, on the one hand, indicates the existence of economic imbalances and, on the other hand, becomes a factor in intensifying instability. Exchange rate fluctuations are caused by various economic shocks, including foreign sanctions or domestic policies.

Therefore, this research seeks to analyze the impact of the international sanctions shock on the nominal exchange rate variable and other selected Iranian macroeconomic variables, and then the impact of the nominal exchange rate shock on selected Iranian macroeconomic variables in the form of a dynamic stochastic general equilibrium model with a New Keynesian approach.

The results of this study indicate that the increase in the intensity of international sanctions has significant effects on macroeconomic variables in the form of a decrease in foreign exchange earnings from oil exports, a decrease in the ratio of the central bank's foreign reserves to the monetary base, and an increase in the nominal exchange rate, leading to a decrease in the export of intermediate goods (non-oil exports). Also, an increase in the nominal exchange rate leads to an increase in the export of intermediate goods (non-oil exports), a decrease in the import of consumer goods, a decrease in the import of capital goods, a decrease in the import of intermediate inputs, and an increase in total production (GDP).