Analysing the Impacts of Fiscal Policy on Assets Price in Iran; An Augmented Time Varying Parameter- Vector Autoregression Approach

Subject Areas : Financial engineering

Maryam Rohani ^{1 *} , Mahmoud Houshmand ² , Mohammad taher Ahmadi Shadmehri ³

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

Received: 2021-08-10 Accepted : 2021-10-10 Published : 2022-03-21

Keywords: stock price, exchange rate, housing price, Fiscal Policy, TVP,

Abstract :

If the asset market is information-efficient and people behave rational, asset prices reflect available information about expected events. On the other hand, choosing the right policy is important in economic stability.Since traditional models have failed to identify correct and appropriate policies, using time varying methods, can select the policy according to the current situation.Based on Bayesian averaging method, the variable total government expenditures was determined as the most fragile variable affecting the asset prices. so, in the TVP-FAVAR model, the effect of this variable on the price of each asset in different time periods in MATLAB has been investigated.According to the results, expansionary fiscal policy, in the long run, has had a positive effect on the price of each asset. This effect on the exchange rate variable has intensified in recent years. It should be noted that based on the results in recent years, fiscal policy has had a negative impact on housing prices and the stock market and has reduced the price of these assets. Also, the fiscal policy shock in short run, on the stock market, in medium term, on the housing index and in long run, has the highest impact on the exchange rate.