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

Mahdi Salehi, Mehdi Behname and Mohammad Sadegh Adibian

International Journal of Islamic and Middle Eastern Finance and Management, 2021, vol. 14, issue 5, 908-927

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: Exchange rate; Monetary policy; Structural VAR; Stock price index (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:imefmp:imefm-04-2018-0150

DOI: 10.1108/IMEFM-04-2018-0150

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