Analyzing and Identifying the Effects of Fluctuations of Exchange Rate, Oil and Gold Prices on Trade Balance in Iran: Approach of Fuzzy Regression and Generalized TOPSIS

Document Type : Original Article

Authors

1 PhD Candidate in Economics, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran

2 Associate Professor of Economics, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran

3 Assistant Professor of Mathematics, Faculty of Mathematical and Computer Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran

10.29252/jem.2023.229805.1809

Abstract

Exchange rates, oil and gold prices are important economic variables that stimulate global economic developments. In this study, the relationships between the variables of oil, gold prices and exchange rate and their impacts on the trade balance in Iran using the new hybrid approach of fuzzy regressions and multi-criteria decision-making framework is investigated. For this, five novel fuzzy regression models are considered and ranked by Generalized TOPSIS method using the annual data during the period of 1979-2021 and among the models, the fuzzy weighted model has been selected as the best model to describe the optimal relationship between variables. According to the results, among the variables of oil, gold and foreign exchange rate, the exchange rate variable has the most impact on the trade balance. Other results show that the use of fuzzy regression models approaches with various logics in the design of the error function produces more accurate estimates of the coefficients. The range of minimum and maximum effect of exchange rate on trade balance was extracted as (1.474 and -1.382). These fuzzy cumulative regressions show that the priority of influencing the trade balance is the exchange rate, oil price and then gold price. Hence to improve the trade balance, policies should be focused on the exchange rate, then the price of oil, and finally the price of gold.

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References

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