Asymmetric effects of financial conditions on the growth of GDP in Iran (Quantile regression analysis)

Subject Areas : Financial Knowledge of Securities Analysis

shirin aminian ¹ (1-Department of Economics, Yazd Branch, Islamic Azad University, Yazd, Iran)
zohre tabatabaienasab ² (2-Department of Economics, Yazd Branch, Islamic Azad University, Yazd, Iran)
Sayed yahya Abtahi ³ (3-Department of Economics, Yazd Branch, Islamic Azad University, Yazd, Iran)
Mohammad Ali dehghantafti ⁴ (4-Department of Economics, Yazd Branch, Islamic Azad University, Yazd, Iran)

Received: 2023-05-14 Accepted : 2023-07-08 Published : 2024-06-29

Keywords: Quantile regression, GDP Growth, economic fluctuations, financial conditions,

Abstract :

In this study, the asymmetric effects of financial conditions on the growth of GDP in Iran are investigated. For this purpose, in the first stage, to extract the weights; It includes 12 variables for the construction of Iran's financial conditions index (IFCI) in order to investigate the current issue in the form of the final quantile model for the period of 1991-2021. Based on the results; in the first and second (lower) quadrants; Financial condition indicators (IFCI) have a negative effect on GDP growth, and in the third and fourth quarters, the intensity of its impact on GDP growth increases. In other words, the financial condition indices (IFCI) of the first (Q1) and second (Q2) quarters have a strong negative temporal correlation with the GDP growth. The fluctuations of downside risks are more severe than those of upside risks, especially in bad financial conditions. According to the chart trend of forecasting the GDP growth of the last quarter, the financial shocks are affected by the first, second and third order shocks. As the financial conditions worsen, the average GDP has decreased, and finally the costs have increased despite a financial crisis. These fluctuations affect the amount of investment by affecting the indicators related to production. Due to the different infrastructures, a separate study of how production is influenced by the uncertainty of the government's monetary policies, government's financial policies, and government's currency policies can provide a correct view of how Iran's financial market changes due to these fluctuations in the macro decisions of the country.