Document Type : Original Article
Authors
1 Ferdowsi University of Mashhad
2 Department of Economics, Faculty of Administrative Sciences and Economics, Ferdowsi University of Mashhad
Abstract
This study examines the dynamic effects of global steel shocks (supply and demand), global economic activity, and exchange rate volatility on Iran's stock market returns during the period 2006 to 2024, coinciding with the imposition of sanctions against Iran. This time frame includes the partial easing of sanctions under the JCPOA (2016–2018). Considering structural breaks and cyclical changes in Iran's macroeconomic variables, the TVP-SVAR model and Bayesian approach (Gibbs sampling algorithm) were employed for modeling. The findings indicate that global steel demand, as an indicator of the global economic condition, has the largest contribution to stock return fluctuations due to its impact on domestic prices and foreign exchange revenues. Following this, exchange rate shocks influence the stock market through increased rial value of exports and liquidity inflows. Global steel supply shows the least impact, likely due to stable global production and Iran's export restrictions. Global economic activity has had a negative effect on stock returns, exacerbated by intensified sanctions. Additionally, simultaneous shocks have amplifying effects: combining exchange rate shocks with other shocks yields positive impacts, while combining global activity shocks with others results in negative outcomes. An analysis of the JCPOA period reveals that the easing of sanctions had limited effects on market improvement due to political uncertainties and infrastructural weaknesses. Based on these results, policies such as managing key shocks (steel demand and exchange rates), establishing market stabilization funds, strengthening economic diplomacy, and planning to capitalize on future opportunities akin to the JCPOA are recommended.
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