Monetary policies and Islamic mutual fund flows: evidence from Islamic republic of Iran

Purpose - The main purpose of this study is to analyze the impact of monetary policies on Islamic mutual fund flows in the Islamic Republic of Iran. Design/methodology/approach - In this study, a panel regression model was used to test the research hypotheses. The sample consists of 4,760 seasonality data and 119 Islamic mutual funds over ten-year period between 2011 and 2020. The dependent variable of the study is the cash flow of Islamic mutual funds and the independent variable of monetary policies includes the money growth rate, the liquidity growth rate, interest rate and inflation rate. Findings - Based on the results of the hypothesis test, all research variables including money growth rate, liquidity growth rate, interest rate and inflation rate have a negative and significant impact on Islamic mutual fund flows. These findings are consistent with the efficient market hypothesis and signaling theory. Research limitations/implications - This study has implication for policymakers, regulators and fund managers. The results show that the negative impact of monetary policies on Islamic mutual fund flows has a direct effect on the allocation decisions and investment strategies of Islamic mutual fund investors and managers. Also, the results of the research can reduce policymakers’ concerns about monetary policies and provide them forward-looking guidance policy. Originality/value - To the best of the authors’ knowledge, this is the first study to empirically examine the impact of monetary policies on Islamic mutual fund flows in an emerging economy and provides a significant contribution to the literature of mutual funds.