The Effect of Financial Stress on Forecast of Macro Economic Indicators (Evidence from of Iran's Economy)

Subject Areas : Journal of Capital Market Analysis

Marzieh Ebrahimi shaghaghi ¹ , Hossein Eslami Mofid Abadi ²

1 - Assistant Professor of Management and Accounting, Islamic Azad University, Shahriar Branch
2 - Department of Accounting and Management, Shahryar Branch, Islamic Azad University, Shahryar, Iran

Received: 2021-08-15 Accepted : 2021-09-19 Published : 2021-08-23

Keywords: Financial stress, Uncertainty Index of Financial Stress, prosperity and Recession,

Abstract :

The present study was conducted to investigate and explain the effect of financial stress on the forecast of macroeconomic indicators of the Islamic Republic of Iran in five steps. In the first step, the effect of financial variables on financial stress has been measured by panel data and random effects. Then, by constructing a composite index of financial stress uncertainty, using the Arch and Garch model, we are able to investigate the relationship between economic growth and financial stress uncertainty index. The study of the impact of financial stress on prosperity and recession using multilayer perceptron method shows that the economy is expected to remain in recession from 2018 until the first quarter of 2020 and with the beginning of the second quarter of 2020 we will see economic prosperity. According to the results, financial stress plays an important role in detecting recession and economic prosperity. The results of research also show that financial stress has a significant negative impact on economic prosperity. Finally, a production function is defined and the effect of financial stress along with other variables of production function on economic growth is measured in a linear and non-linear way. According to the results, financial stress index has a negative and significant effect on economic growth in long and short term models.