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Structural shocks in monetary policy, exchange rates, and stock prices using SVAR in Iran

Mahdi Salehi, Mehdi Behname, Mohammad Sadegh Adibian

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Article publication date: 7 April 2021

Issue publication date: 4 November 2021

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Abstract

Purpose

This paper aims to examine the interrelationships of monetary policy's structural shocks, the real exchange rate and stock prices.

Design/methodology/approach

According to quarterly data, variables such as gross domestic product, consumer price index, the real exchange rate, stock price and monetary policy indices in the structural vector autoregressions model are estimated. These variables' volatility is attributed to other variables’ structural shocks separately, and analysis of variance tables for all variables is presented.

Findings

The results show that structural shock on the exchange rate does not affect the stock price, but the monetary policy's structural shock positively impacts the real exchange rate. Moreover, the real exchange rate and monetary policy's structural shocks have a negative impact on the stock price index. However, no significant effect is found pertain to the real exchange rate structural shock, statistically.

Originality/value

To the best of the authors’ knowledge, the current study model is relatively novel in developing countries, and the study sought strength to develop knowledge on the subject of the study.

Keywords

Citation

Salehi, M., Behname, M. and Adibian, M.S. (2021), "Structural shocks in monetary policy, exchange rates, and stock prices using SVAR in Iran", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 14 No. 5, pp. 908-927. https://doi.org/10.1108/IMEFM-04-2018-0150

Publisher

:

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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