Abstract

Unemployment is one of the problems that global economics, especially the economy of
developing countries such as Iran is faced with. Therefore, there have been many studies to
investigate the variables which affect unemployment in macroeconomics. Considering
exchange rate volatility in recent years which have affected most of major variables of
economy in Iran, this study tried to investigate the relationship between exchange rate and
unemployment in Iran using the annual data of 30 years (from 1981 to 2012). To achieve the
objectives of the study, autoregressive econometric model with distributed lag was used to
assess the relationship between real exchange rate and unemployment. This model consisted
of five main variables, namely unemployment rate, exchange rate, export, import, and gross
domestic product. The results of the study demonstrated that economic growth had a
significant and positive effect on unemployment. In addition, it was shown that there was a
negative relationship between unemployment and exchange rate.