Exchange rate fluctuation is the main cause of economic instability
According to Iran EconomistMohammadreza Farzin, Governor General of the Central Bank, at the 30th Annual Monetary and Exchange Policy Conference, referring to what the Central Bank has done and what it wants to do, stated: We are committed to the Central Bank announcing its policies in a transparent environment and implementing them. What has been announced to be committed.
Referring to the needs and policies of economic stabilization, he gave a definition of stabilization policy and said: Stabilization policy means the policies and measures designed by the government and the central bank during the period of economic instability (stagnation, unemployment, debt crisis, etc.) in order to restore stability to is the economy; Therefore, we mean macroeconomic indicators and our goal is to control inflation.
The Governor General of the Central Bank pointed to the leadership’s statement about the inflation control year and said: To implement a policy, we must do it within the framework of a scientific theory. Our theory is economic stabilization.
He stated: The exchange rate in our economy is the main factor of economic instability and economic stabilization is necessary in this regard.
Referring to the opinions of various schools of thought for the intervention of policymakers and intervention to control instability, the Governor of the Central Bank said: “You cannot sit aside until the economy becomes stable, and you must intervene to create stability.”
Farzin said: We know the set of policies carried out by the central bank and other economic institutions as stabilization policy.
The Governor General of the Central Bank added: After the statements of the leader of the revolution, we formulated a plan to curb inflation and production growth, and after approval by the government, it has been put on the agenda. Of course, we are not oblivious to financial policies, and these financial and monetary policies must be coordinated to be effective.
The Governor of the Central Bank continued to emphasize: The exchange rate issue has worried everyone, although it has decreased in recent weeks. Fluctuations in exchange rates signal other markets and cause instability.
Farzin said: The demand for foreign exchange in our informal market is generally related to several factors, including smuggling, capital flight, and the demand for foreign currency to cover losses (possible reduction in purchasing power due to future uncertainties).
Referring to the sources of currency supply in the informal market, he said: the main sources of currency supply include exporters of smuggled goods, exporters of goods and services (non-timely fulfillment of foreign exchange obligations).
Farzin said: Some call the informal market a free market, while there is no market without regulations and regulation. The world’s free currency market is Forex, which is full of regulations and no one can trade contraband money in it.
Referring to the characteristics of the informal market, the Governor General of the Central Bank stated: the high level of risk of the activities of the market’s operators, limited access to information, the shallowness of the market, low sensitivity to fundamental variables and high sensitivity of the rate to the news of political and international developments are among the characteristics of It is an informal currency market.
He continued: In this market, there is a suitable platform for speculation and tomorrow’s transactions, and unfortunately, social networks are used to determine the unrealistic price of the currency.
Referring to the key indicators in the informal market since 2019, Farzin stated: the rate of change is very high, and for example, it changed by 30% in 2017 and by 19.5% in 2019, and it changed to 28.4% in 2019. . Considering these issues, stabilization policy is important because there is no stability in this rate.
Referring to recent sensitivities, he said: When a false and baseless comment disrupts the market, it means that the currency market is very unstable. The evolution of the dollar in the informal market is caused by expectations that change, which is mostly caused by political developments and foreign relations and sanctions issues, and has no fundamental reason.
The head of the central bank emphasized: the relationship between the dollar rate in the informal market and coins is 90%, with housing in Tehran 61.5% and with foreign cars 65%; Therefore, there is a deep relationship between the asset market and the dollar of this market.
In response to the question why stabilization is important, he stated: The inflation rate is high and fluctuations are more than usual. Economic activists and people pay little attention to announced policies. Inducing anxiety and fear of the future has become a normal routine and the performance of the indicators has also fueled distrust. As a result, economic stabilization and then the implementation of reform policies are necessary. Also, it is necessary to strengthen the governance and accreditation of monetary and foreign exchange and credit policies, which must be operationalized to achieve stabilization.
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