The Effect of Economic Instability on International Competitiveness of Iran’s Agricultural Sector

The main purpose of present research is to examine the impact of economic instability on Iran’s international competitiveness of the agricultural sector. In this framework, we have first measured the real exchange rate volatility by using generalized autoregressive conditional heteroskedasticity (GARCH) model, and then we have estimated the competitiveness equation including the volatility during time period 1995-2011. The results obtained from the panel data estimations show that the economic instability has a negative and significant effect on the competitiveness of Iran’s agricultural sector. Also, according to the other results, per capita capital, the total factor productivity have a positive and significant effect, and the government size, the external shocks(financial crisis) , value added volatility and climate situation have a negative and significant effect on the competitiveness. In the framework of the obtained results, it is necessary to pay attention on the factors affecting on competitiveness and the design of a certain and appropriate strategy for the continuous export of agricultural products to prevent the instability of export and loss of market.