Measuring Effects of Rial Appreciation on the Level and Structure of Domestic Support in Iran

Document Type : Research Paper

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Abstract

 This paper theoretically explains how AMS, criteria for measuring domestic support in AOA, is affected by distorting exchange rate and how Rial appreciation by government intervention in exchange market changed the level and structure of domestic support in Iran between 2001 and 2005.Our Results shows that Rial appreciation causes to overestimate the share of price supports to AMS in all years, overestimating AMS in 2002, 2004 and underestimating in 2001, 2003, 2005. This reveals that net effect of exchange rate on AMS depends not only on the manner of support but also on the distortion size in price support and inputs subsidies.

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