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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Meysam KAVIANI & Parviz SAEEDI & Hosein DIDEHKHANI & Seyed Fakhreddin FAKHREHOSSEINI, 2019. "Government Expenditure, Risk and Return: A Framework for a New Keynesian Model in the Iranian Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 5-24, December.
    • Handle: RePEc:rjr:romjef:v::y:2019:i:4:p:5-24
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    More about this item

    Keywords

    Capital Expenditure; Government; Risk; Return;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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