Sanctions and Iranian Stock Market: Does the Institutional Quality Matter?

Soheil Roudari, Farzaneh Ahmadian- Yazdi, Seyed Hadi Arabi and Shawkat Hammoudeh

MPRA Paper from University Library of Munich, Germany

Abstract: The effect of shocks of sanctions, oil revenues, exchange rate, and inflation on different regimes of the Iranian stock market is examined in the two cases (with and without considering institutional quality (IQ)) during the 1984-2020 period, using the TSVAR model. The results show that the difference between the impulse-response functions in the bullish and bearish market, with and without considering IQ, is only related to the effects of sanctions and inflation, respectively. In fact, considering the IQ case, inflation has a medium-term positive effect on the stock market; however, without the IQ there has only been a positive short-term effect. Accordingly, within increasing sanctions, if the IQ has been also enhanced, a positive shock of sanctions will lead to a long-term improvement in the bullish market. Also, in the bearish market, the positive shock of sanctions and exchange rate, along with increasing IQ, will lead to a long-term growth in the Iranian stock market.

Keywords: Sanctions; Stock Market; Institutional Quality; TSVAR Model (search for similar items in EconPapers)
JEL-codes: C24 F31 F51 G29 (search for similar items in EconPapers)
Date: 2022-11-02, Revised 2023-03-15
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Borsa Istanbul Review 4.23(2023): pp. 919-935

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