Abstract

This study has dealt with the relationship between the informal United States dollar rate and the Islamic system based interest rate of Iran and it also has compared with the informal exchange rates of Britain, Australia and Japan. The relevant data during 1991 to 2009 have been employed to compare the results. The unit root test, Dickey-Fuller, Durbin-Watson, White tests and the least-square estimate model have been used along with software Eviews7 and SPSS17 in this study. Our results unveiled a meaningful relationship between the interest rate in Iran, relying on the shariah system, and informal USD¹, GBP², and AUD³ rates. However, no meaningful relationship was found between the interest rate and informal JPY⁴ rate. Similarly, the results of such comparisons imply a stronger relationship between the interest rate and informal USD rate to other mentioned informal exchange rates. The coefficients of determination between interest rate in Iran and informal exchange rates of USD, GBP and AUD are 23, 20 and 16%, respectively. Accordingly, relying on the interest rate changes, changes of the informal USD rate enjoys more explanatory power than changes of the informal GBP and AUD rates.

Key words: Exchange rate, interest rate in Shariah system, Islamic finance, theory of international Fisher effect.