Investigating the dynamic Impacts of monetary policy on the return of Tehran Stock Exchange industries using the PMG model

Document Type : پژوهشی

Authors

Seyed Hassan Masoudi Alavi ¹

Mohammad Nadiri ²

Alireza Saranj ²

¹ Ph.D. Candidate in Finance, Financial Engineering, Farabi College, University of Tehran

² Associate Professor,Department of Financial Management and Accounting, Farabi College, University of Tehran

https://doi.org/10.22067/mfe.2024.89357.1442

Abstract

The purpose of this article is to investigate the impacts of monetary policy on the return of different industries of Tehran Stock Exchange. According to the existing theories, this effect can be different. In the current research, using the Pooled Mean Group (PMG) method, in the period of April 2010 to March 2022, it examines the above issue monthly in 35 active stock market industries. In this research, based on the method of principal component analysis (PCA) and with the proxies of credit volume, exchange rate and net foreign assets of the central bank, a monetary conditions index suitable for Iran's economy was created as a measure of monetary policy. The results indicate that in the long term, monetary policy has a positive and significant impact on the return of Tehran Stock Exchange industries. But in the short-term and the current period, it has no impact on the return of these industries, and it leaves its impacts with two lags. According to the obtained results, monetary policy makers should act in line with the capital market and consider the trust and interests of investors. In this situation, investors should pay attention to monetary policy tools along with their time horizon and try to neutralize the possible risk.

Keywords

Monetary policy

Return of Tehran Stock Exchange industries

Monetary Conditions Index

PMG model

Subjects

• financial and monetary policies

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