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Testing the Long-Run Neutrality of Money In Stock Market of Iran

Author

Listed:
  • Monjazeb, Mohammad Reza

    (Assiciate Professor, Department of Economics,Kharazmi University,Tehran)

  • Rafei, Meysam

    (Asistant Professor, Department of Economics,Kharazmi University,Tehran)

  • Ahmadi, Maryam

    (M.Sc of Industrial Engineering-Socio Economic Systems Engineering-Economic Systems Planning, Kharazmi University,Tehran)

Abstract

In recent years, the role of stock market in the economy of Iran is growing. Therefore, it is important to recognize the factors affecting to this market. Changes in the money supply can be one of this factors, so this study investigates long run neutrality of money in the stock market of Iran. In this regard, quarterly data of monetary aggregates M1, M2 and the real stock indexes that is total index, industrial index and financial index has been employed in this study over the period ranging from the second quarter of 2001 to the second quarter of 2015. In this paper the order of integration of the series for money supply and real stock indexes has been identified by using Hegy test. The Fisher-Seater (FS) methodology has been used to test the neutrality of money in this research. The empirical results indicate that permanent changes in money supply (defined as M1) don’t affect the real stock indexes. Similar results were also obtained for money defined as M2. In general, the results support that money is neutral in the stock market of Iran

Suggested Citation

  • Monjazeb, Mohammad Reza & Rafei, Meysam & Ahmadi, Maryam, 2020. "Testing the Long-Run Neutrality of Money In Stock Market of Iran," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 6(4), pages 137-162, February.
    • Handle: RePEc:ris:qjatoe:0167
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    More about this item

    Keywords

    Neutrality of money; Stock market of Iran; Stock price indexes; Fisher and Seater Methodology;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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