Volume 10, Issue 36 (6-2019)
jemr 2019, 10(36): 75-126 |
Back to browse issues page
Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
Rezaei Q, Shahrestani H, Hozhabre kiani K, Mehrara M. The Impact of Monetary Policy on the Stock Market Returns and Instability: Comparison of Monetary Policy Tools in Iran. jemr 2019; 10 (36) :75-126
URL: http://jemr.khu.ac.ir/article-1-1810-en.html
URL: http://jemr.khu.ac.ir/article-1-1810-en.html
1- Islamic Azad Univesity of Qazvin
2- Islamic Azad University of Tehran
3- Islamic Azad University of Tehran ,Kianikh@yahoo.com
4- University of Tehran
2- Islamic Azad University of Tehran
3- Islamic Azad University of Tehran ,
4- University of Tehran
Abstract: (5412 Views)
After the recent financial crisis, especially the financial crisis 2008, This raises the important question of what is the role of monetary policy in occurrence and prevention of the financial instability? so, this paper investigate the dynamics impact of monetary policy on the stock market returns and instability using Structural Vector Autoregression (SVARs) model During the period 1992:q2 to 2017:q1. In this study, the effect of monetary policies via the various monetary tools used by the Central Bank on the stock market is studied. to illustrate the performance of monetary policies, the four variables of weighted interest rate, monetary base growth rate, bank reserve ratio, and growth of commercial banks' debt to the central bank have been used as monetary policy tools. The results of the impulse response function(IRF) show that monetary policy tools do not affect the stock market returns and instability. The results of the Forecast Error Variance Decomposition (FEVD) also show that the share of monetary tools in explaining the changes in stock market returns and instability is insignificant and less than ten percent each. Although, the monetary base share is higher than the others, so the central bank's policy tools do not has a particular impact on the behavior and instability of the stock market.
Keywords: Monetary Policy, Monetary Instability, Stock Market, Structural Vector Autoregression (SVARs) model
Type of Study: Applicable |
Subject:
پولی و مالی
Received: 2019/01/29 | Accepted: 2019/07/31 | Published: 2019/09/24
Received: 2019/01/29 | Accepted: 2019/07/31 | Published: 2019/09/24
References
1. Abbasian E., Fallahi S., Soheili Ahmadi H.,(2012).Variables affecting the uncertainty of the Tehran Stock Exchange Index uncertainty: endogenous or exogenous variables. Journal of Applied Economics, 10(3), 1-28. {In Persian}.
2. Abouwafia H.E., Chambers M.J.(2015). Monetary policy, exchange rates and stock prices in the Middle East region, International Review of Financial Analysis. 37 ,14-28. [DOI:10.1016/j.irfa.2014.11.001]
3. Ahmadzadeh A, Yavari K, Isaee Tafreshi M, Salehabadi A. An Analysis on Methods of Market Efficiency Evaluation in Iran . jemr. 2014; 5 (17) :1-28. {In Persian}.
4. Akbary Roshan, M., Shaker, A. (2014). The Effects of Government Expenditure, Liquidity and Market Structure on Financial Development of Stock Market. Economics Research, 14(53), 109-142. {In Persian}.
5. Antoniou, A. Garrett, I. Priestley R. (1998),Macroeconomic variables as common pervasive risk factors and the empirical content of the arbitrage pricing theory, Journal of Empirical Finance, 5(3), 221-240. [DOI:10.1016/S0927-5398(97)00019-4]
6. Appleyard, D.R., Field, A.J. (2017)International Economics. New York, NY : McGraw-Hill Education press.
7. Aydin B, Volkan E (2011).Incorporating Financial Stability in Inflation Targeting Frameworks. IMF Working Paper. WP/11/224. [DOI:10.5089/9781463904326.001]
8. Bailey, R.E. (2005). The Economics of Financial Markets, Cambridge University Press, 548 pages [DOI:10.1017/CBO9780511817458]
9. Bashiri S, Pahlavani M, Boostani R.(2016). Stock Market Fluctuations and Monetary Policy in Iran. Jemr, 6 (23) :103-157. {In Persian}. [DOI:10.18869/acadpub.jemr.6.23.103]
10. Bernanke B.S, Kuttner K.N. (2005). What explains the stock market's reaction to Federal Reserve policy. Journal of Finance,(60), 1221-1257. [DOI:10.1111/j.1540-6261.2005.00760.x]
11. Bekaert G., Guojun Wu G. (2000)Asymmetric Volatility and Risk in Equity Markets. The Review of Financial Studies, 13(1), 1-42. [DOI:10.1093/rfs/13.1.1]
12. Bordo, M.D, Siklos P, (2017a). Central Bank Credibility before and after the Crisis, Open Economies Review, 1(28), 19-45. [DOI:10.1007/s11079-016-9411-2]
13. Bordo M.D., Wheelock D.C.(2007). Stock Market Booms and Monetary Policy in the Twentieth Century Federal Reserve Bank of St. Louis Review, 89(2), 91-122. [DOI:10.20955/r.89.91-122]
14. Caporale, G.M., Cipollini, A., & Demetriades, P.O. (2005). Monetary policy and the exchange rate during the Asian crisis: Identification through heteroscedasticity. Journal of International Money and Finance, 24(1), 39-53. [DOI:10.1016/j.jimonfin.2004.10.005]
15. Cocriş V, Nucu A.E. (2013) Monetary policy and financial stability: empirical evidence from Central and Eastern European countries, Baltic Journal of Economics, 13(1), 75-98. [DOI:10.1080/1406099X.2013.10840527]
16. Criste A, Lupu I.(2014). The central bank policy between the price stability objective and promoting financial stability. Procedia Economics and Finance, 8, 219 - 225. [DOI:10.1016/S2212-5671(14)00084-7]
17. Dadgar, Y., Keshavarz, G., Tyataraj, A. (2006). The Analysis of Relationship Between Inflation and Economic Growth in Iran. Journal of Iran's Economic Essays, 3(5), 60-91. {In Persian}.
18. Dallali Esfahani R, samadi S, Mojahedi M M, Jabbari A, Samadi Boroujeni R(2012). Developing an Inflation Model for Iranian Economy Based on Micro-Foundations. Jemr, 2 (7) :127-151.{In Persian}.
19. Danyali dahose M., Mansori H.,(2012). Investigating Weak Form of Efficiency in Tehran Stock Exchange and Ranking Factors that Affect it. Economics Research, 12(47), 71-96. . {In Persian}.
20. Enders W.(2015). Applied Econometric Time Series, . Fourth edition, Wiley press. 496 Pages
21. Fazio D.M, Tabak B.M, Daniel O. Cajueiro D.O. (2015). Inflation targeting: Is IT to blame for banking system instability. Journal of Banking & Finance, 59, 76-97 [DOI:10.1016/j.jbankfin.2015.05.016]
22. Fausch J, Sigonius M.(2018).The impact of ECB monetary policy surprises on the German stock market. Journal of Macroeconomics, 55(c), 46-63. [DOI:10.1016/j.jmacro.2017.09.001]
23. Flávio de Freitas Val F., Klotzle M.C, Figueiredo Pinto A.C & Barbedo C.H. (2018): Stock Market Reaction to Monetary Policy: An Event Study Analysis of the Brazilian Case, Emerging Markets Finance and Trade, 11(54), 2577-2595. [DOI:10.1080/1540496X.2017.1364622]
24. Gospodinov, N, Jamali, I.,(2015). The response of stock market volatility to futures-based measures of monetary policy shocks, International Review of Economics and Finance, Elsevier, vol. 37(C), 42- 54 [DOI:10.1016/j.iref.2014.11.001]
25. Groenewold, N., and P. Fraser. (1999). 'Time-Varying Estimates of CAPM Betas.'' Mathematics and Computersin Simulation 48(4-6): 531-539. [DOI:10.1016/S0378-4754(99)00033-6]
26. Jafari Samimi A, Balounejad Nouri R(2014). Application of Wavelets and Fractional Brownian Motion in Weak Efficiency Hypothesis of Testing in Tehran Stock Exchange. jemr. 5 (17) :29-56.{In Persian}.
27. Jalali naeini S.A.,(2015).Monetary Policy: Theoretical Foundations and Performance Evaluation in Iran, Tehran, Monetary and Banking Research Center press, 270 pages{In Persian}.
28. Jalili Z, Asari Arani A, Yavari K, Heydari H. Evaluating the Monetary Policy Transmission Mechanism through the Stock Market in Iran Using the Structural Vector Auto Regressive (SVAR) Model. QJER. 2018; 17 (4) :173-195.{In Persian}.
29. Kaminska I, Roberts-Sklar M.(2018). Volatility in equity markets and monetary policy rate uncertainty. Journal of Empirical Finance. 45, 68-83. [DOI:10.1016/j.jempfin.2017.09.008]
30. Keshavrz Q., Mahdavi O,(2006). Is the stock market in Iran's economy a channel for transmission of monetary policy? Journal of Economic Research, 40(4), 147-170.{In Persian}.
31. Lutkepohl, H. (2005). New Introduction to Multiple Time Series Analysis. Berlin: Springer Verlag. [DOI:10.1007/978-3-540-27752-1]
32. Lutkepohl, H., & Kratzig, M. (2004). Applied time series econometrics. Cambridge University Press. [DOI:10.1017/CBO9780511606885]
33. Mishkin, Frederic S(2010). The economics of money, banking, and financial markets. The Addison-Wesley series in economics press.
34. Monjazeb M.,(2006). An Analysis of the Effectiveness of the Expansion of the Volume of Money on Production and Inflation in the Iranian Economy. Quarterly Journal of economic research, 6(3). 1-16. .{In Persian}.
35. Moshiri S., Vashgani M.,(2010). Study of the Monetary Policy Transmission Mechanism and its Timing in Iran. Economic Modeling, 4(11), 1-32.{In Persian}.
36. Noferesti M., 2005). The effect of monetary and currency policies on the Iranian economy in the framework of a dynamic econometric model. Journal of Economic Research,3(40).1-30. {In Persian}.
37. Nonezhad M., Zamani kordsholi B., Hoseinzadeh S.H.,(2012).The effect of monetary policy on the stock price index in Iran. Quarterly Journal of financial economics, 6(20). 9-38. {In Persian}.
38. Rezazadeh, A. (2016). The Impact of Macroeconomic Variables on Tehran Stock Market Returns Volatility: GARCH-X Approach. Quarterly Journal of Applied Theories of Economics, 3(2), 121-136.{In Persian}.
39. Roll R, Ross S.A. (1995). The Arbitrage Pricing Theory Approach to Strategic Portfolio Planning. Financial Analysts Journal. 51(1),122-131 [DOI:10.2469/faj.v51.n1.1868]
40. Ruiz J.(2015).Response of Spanish stock market to ECB monetary policy duringfinancial crisis, The Spanish Review of Financial Economics, Volume 13(2), 41-47. [DOI:10.1016/j.srfe.2015.09.001]
41. Shahbazi K., Rezaei E., Abbasi A.,(2013). Monetary and Financial Policies and Market Stock Efficiency: Empirical Evidence in Iran. Quarterly Journal of Financial knowledge of securities analysis, 6(20), 63-77. .{In Persian}.
42. Sharifi Renani H., Komijani A., Shahrestani H.,(2010). Investigating the mechanism of monetary transmission in Iran: Structural Vector Autoregressive Approach. Quarterly Journal of monetary and banking research. 1(2), 145-176. .{In Persian}.
43. Shokoh A., damankeshideh M., Hadinezhad M.,(2017). Estimation of the Effect of Monetary Policy on the Stock Price Index in Iran (Case Study: Active Petrochemical Industries in Tehran Stock Exchange). Quarterly Journal of financial economics, 11(40), 139-158.{In Persian}.
44. Smets F.(2014). Financial Stability and Monetary Policy: How Closely Interlinked? International Journal of Central Banking.10(2), 263-300.
45. Suhaibu I, Harvey S.K, Amidu M.(2017). The impact of monetary policy on stock market performance: Evidence from twelve (12) African countries.Research in International Business and Finance, c(42), 1372-1382 [DOI:10.1016/j.ribaf.2017.07.075]
46. Svensson L.E.O(2017). Leaning Against the Wind: The Role of Different Assumptions About the Costs. [DOI:10.3386/w23745]
47. National Bureau of Economic Research, Inc.NBER Working Papers 23745.
48. Taghavi M., Aliasgar L.,(2006). Investigating the effect of monetary policy on the volume of deposits, credites and liquidity of the banking system. Economics Research, 6(20), 131-165. {In Persian}.
49. Taiebnia A, Taghimollaee S. Money and Inflation in Iran: Vector Auto-Regression (VAR) Approach. The Journal of Planning and Budgeting. 2010; 15 (1) :3-29. {In Persian}.
50. Torabi T., Homan T.(2010). The Effects of Macroeconomic Variables on the Output Indicators of Tehran Stock Exchange. Economic Modeling, 4(11), 121-144. {In Persian}.
51. Van Rensburg, P. (1999). Macroeconomic identification of candidate APT factors on the Johannesburg Stock Exchange. Journal for Studies in Economic and Econometrics, 23, 27-53.
52. Verona F., Martins M.F., Drumond I.(2017). Financial shocks, Þnancial stability, and optimal Taylor rules, Journal of Macroeconomics (2017). [DOI:10.1016/j.jmacro.2017.04.004]
53. Yazdani, M., Zare, S. (2016). Investigating Effect of Exchange Rate Shocks on Inflation in Iranian Economy during Seasonal Period 2000-2012. Journal of Applied Economics Studies in Iran, 5(17), 171-197. {In Persian}.
54. Yoshino, N., Taghizadeh-Hesary F., Hassanzadeh A, and Prasetyo A.D(2014). Response of Stock Markets to Monetary Policy: The Tehran Stock Market Perspective, Journal of Comparative Asian Development, 13(3), 517-545. [DOI:10.1080/15339114.2014.985458]
55. Zhang B., Hu J., Jiang M. (2017). Monetary Shocks and Stock Market Fluctuations: With An Application to the Chinese Stock Market. The Singapore Economic Review, 63(1). [DOI:10.1142/S0217590817400318]
Send email to the article author
| Rights and permissions | |
 | This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. |
