LONG-RUN AND SHORT-RUN EFFECTS OF MONETARY AND EXCHANGE RATE VARIABLES ON STOCK PRICES IN IRAN

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ALAVIRAD A.; HAGHNEVIS H.

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Journal: IRANIAN JOURNAL OF APPLIED ECONOMICS Year:2011 | Volume:2 | Issue:4 Page(s): 43-59

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Title

LONG-RUN AND SHORT-RUN EFFECTS OF MONETARY AND EXCHANGE RATE VARIABLES ON STOCK PRICES IN IRAN

Author(s)

ALAVIRAD A. | HAGHNEVIS H. | Issue Writer Certificate

Keywords

TEHRAN STOCK EXCHANGE PRICE INDEXQ3

MONETARY VARIABLESQ3

ARDL MODELQ2

ERROR CORRECTION MODEL (ECM)Q2

Abstract

The movement in the stock price index is an important indicator in the economic system of a country. The purpose of this paper is to examine the long-run and short-run relations between Tehran Stock Exchange (TSE) price index and monetary and exchange rate variables in Iran. We have used Autoregressive Distributed Lag (ARDL) modeling approach and Error Correction Model (ECM) to determine the effects of monetary and exchange rate variables on TSE price index in the long-run and short-run. This procedure for small sample will be the most appropriate. Quantitative estimates based on the time series monthly data from 2004 to 2009, indicate that liquidity (M2) has a positive effect on TSE price index in the long-run. But, free market exchange rate (FER) and legal reserve (LR) have a negative effect on TSE price index in the long-run. On the other hand, MONETARY VARIABLES have a significant effect on TSE price index in the short-run. However, the coefficient of the Error Correction Term (ECT) shows that the speed of adjustment is slow and the ECM can only explain 69 per cent of the fluctuations of TSE price index.

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APA: Copy

ALAVIRAD, A., & HAGHNEVIS, H.. (2011). LONG-RUN AND SHORT-RUN EFFECTS OF MONETARY AND EXCHANGE RATE VARIABLES ON STOCK PRICES IN IRAN. IRANIAN JOURNAL OF APPLIED ECONOMICS, 2(4), 43-59. SID. https://sid.ir/paper/201949/en

Vancouver: Copy

ALAVIRAD A., HAGHNEVIS H.. LONG-RUN AND SHORT-RUN EFFECTS OF MONETARY AND EXCHANGE RATE VARIABLES ON STOCK PRICES IN IRAN. IRANIAN JOURNAL OF APPLIED ECONOMICS[Internet]. 2011;2(4):43-59. Available from: https://sid.ir/paper/201949/en

IEEE: Copy

A. ALAVIRAD, and H. HAGHNEVIS, “LONG-RUN AND SHORT-RUN EFFECTS OF MONETARY AND EXCHANGE RATE VARIABLES ON STOCK PRICES IN IRAN,” IRANIAN JOURNAL OF APPLIED ECONOMICS, vol. 2, no. 4, pp. 43–59, 2011, [Online]. Available: https://sid.ir/paper/201949/en

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