Financial stress and economic dynamic in iran (An Application of the Markov Switch Model and neural networks)

Subject Areas : Journal of Investment Knowledge

marzieh ebrahimi shaghaghi ¹ , mohammad ebrahimi maddahi ² , Taghi´´´ TORABI ³

1 - Ph.D. In Financial Management, Department of Financial Management, Science and Research Branch, Islamic Azad University, Tehran, Iran.
2 - Assistant Prof of Psychology, Department of Psychology, Shahed University, Tehran, Iran
3 - Associate Prof of economic, Department of Economic, Sience and Research Branch, Islamic Azad University, Tehran, Iran.

Received: 2020-01-27 Accepted : 2020-03-14 Published : 2022-09-23

Keywords: Financial Stress Uncertainty Index, Prosperity and Recession, Financial Stress,

Abstract :

It has a significant negative impact on economic growth.One of the warning signs of the financial crisis is the increasing stress that is occurring in the financial markets, leading to increased uncertainty and instability in the economy. Therefore, the main purpose of this study is to calculate financial stress index in Iranian financial markets and identify its effects on economic growth.This paper deals with the relationship between financial stress and recession and economic prosperity in three stages. at first, the effect of financial variables on financial stress has been measured by panel data using random data and random effects.Then by constructing a composite index of financial stress uncertainty using Arch & Garch model we are able to investigate the relationship between economic growth and financial stress uncertainty index. In the second the effect of financial stress on economic growth and recession by multilayer perceptron method shows that it is predicted that the economy will continue to be in recession from the year 1397 to the first quarter of 1399 and with the beginning of the second season of 1399 we will see economic prosperity.Finally, the effect of financial stress along with other variables of production function on economic growth were measured using Markov switching self-regression model. Based on the results, the index has a significant negative effect on economic growth in the long run and short run models.

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