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The Effect of Inflation Rate on the Performance of the Stock Market in Iran (in Persian)

Author

Listed:
  • Mosavi, Mohammad Hshem

    (Iran)

  • Ragheb, Mariam

    (Iran)

Abstract

This study examines the effect of inflation rate on the performance of Iranian stock market (Activity and Liquidity index) in long run and short run. In this study, time series data (from April 2000 to March 2011) has been used on monthly basis during 10 years. For the long run and short run relationships between variables, the Auto Regressive Distributed Lag (ARDL) and for the short run relationship fluctuations between variables to long run equilibrium values, the Error Correction Model (ECM) are used. The results show that the effect of inflation rate on the performance of stock market, in the short run, has been positive. Therefore, the “Fisher Hypothesis” in the short run is confirmed in the Iranian stock market. The effect of inflation rate on the value of trade, the volume of trade and the total value traded to market capitalization ratio in the long run has been positive. Also there is no significant relationship, in the long run, between inflation rate and the number of new issues and the volume of shares traded to the volume of share listed ratio.

Suggested Citation

  • Mosavi, Mohammad Hshem & Ragheb, Mariam, 2014. "The Effect of Inflation Rate on the Performance of the Stock Market in Iran (in Persian)," Journal of Monetary and Banking Research (فصلنامه پژوهش‌های پولی-بانکی), Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 7(19), pages 125-142, May.
    • Handle: RePEc:mbr:jmbres:v:7:y:2014:i:19:p:125-142
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    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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