Government Expenditure, Risk and Return: A Framework for a New Keynesian Model in the Iranian Economy

Meysam Kaviani (), Parviz Saeedi (), Hosein Didehkhani () and Seyed Fakhreddin Fakhrehosseini ()
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Meysam Kaviani: Department of Financial management, Aliabad Katoul Branch, Islamic Azad University, Aliabad Katoul, Iran
Parviz Saeedi: Department of Accounting and management, Aliabad Katoul Branch, Islamic Azad University, Aliabad Katoul, Iran (Corresponding Author
Hosein Didehkhani: Department of Financial engineering, Aliabad Katoul Branch, Islamic Azad University, Aliabad Katoul, Iran
Seyed Fakhreddin Fakhrehosseini: Department of Business Management, Tonekabon Branch, Islamic Azad University, Iran

Journal for Economic Forecasting, 2019, issue 4, 5-24

Abstract: According to the studies, capital expenditure shocks are one of the most important factors affecting the capital market (stock market). Since economic modeling based on the Dynamic Stochastic General Equilibrium (DSGE) Modeling is one of the best tools for understanding the mechanisms behind the effect of economic shocks on risk and stock returns, the present study proposed a new Keynesian model to explore the impact of capital expenditure shocks on risk and stock return to the Iranian economy. The results showed that capital expenditure shocks have a negative impact on systematic risk and stock returns, and then by decreasing their impact, such shocks returned to equilibrium very quickly in the next periods.

Keywords: Capital Expenditure; Government; Risk; Return (search for similar items in EconPapers)
JEL-codes: E37 E44 G17 H30 (search for similar items in EconPapers)
Date: 2019
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