Analysis the effects of monetary policy on stock prices in the Iranian economy; Method of Bayesian Averaging and Augmented Time Varying Parameter- Vector Autoregression Approach

Subject Areas : Financial Economics

Maryam Rouhani ¹ , Mahmoud Houshmand ² , M. Taher Ahmadi Shadmehri ³

1 - Department of Economics, Ferdowsi University, Mashhad, Iran
2 - Department of Economics, Faculty of Administrative and Economic Sciences, Ferdowsi University of Mashhad, Mashhad, Iran
3 - Department of Economics, Ferdowsi University, Mashhad, Iran

Received: 2023-12-08 Accepted : 2024-01-30 Published : 2024-03-20

Keywords: stock price, E5, C01, TVP, Keywords: Monetary policy, H5, MBA JEL Classification: C01,

Abstract :

Abstract One of the basic dimensions in the discussion of financial instability is the volatility of asset prices. The reason for the change in asset prices is not only the policies of the central bank, but examining its impact interprets an important part of its changes. In this research, based on the method of Bayesian averaging and principal component analysis, the monetary policy index effective on the stock price has been determined and through the TVP-FAVAR model, the effect of this variable on the stock price has been investigated in MATLAB software. According to the results, the changes of one standard deviation in the monetary policy index over time on stock prices have been U-shaped. Changes of one standard deviation in the monetary policy index had a positive and strong impact on stock prices in the beginning to the end of the period.

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