Exchange rate fluctuations have a major role in business cycles. Thus, this study aimed to analyze the effects of a managed floating exchange rate regime on the dynamics of some macroeconomic variables in Iran. To this end, a dynamic stochastic general equilibrium (DSGE) model was designed for Iran. Then, the structural parameters of the model were estimated using quarterly data from 1989 to 2016 and the Bayesian method. Conditional forecasts were obtained and the results showed that a managed floating exchange rate regime, compared with a fixed regime, could lead to more economic growth and, at the same time, less speculative activities in stock and exchange markets. Moreover, the results of variance decomposition revealed that exchange rate shocks were the most important shock in driving business cycles and fluctuations in other variables. Based on these findings, policymakers are recommended to choose a managed floating exchange rate regime as the policy rule.