Investigating the effect of economic policy uncertainty on the capital market development in Iran (Grigory-Hansen co-integrating approach in phase structural break)

Document Type : Research Paper

Authors
Parisa Mohammadi
Farid Askari
Farzaneh Khalili
Department of Economics, Abhar Branch, Islamic Azad University, Abhar, Iran
10.22075/ijnaa.2022.26517.3339
Abstract
Today, in all countries, the prosperity of the capital market is recognized as one of the indicators of economic dynamism. The extension of the capital market leads to an increase in the depth of this market and in the long run, will lead to financial development, such that this financial development ultimately will lead to stable economic growth. Therefore, the main purpose of this study is to investigate the effect of economic policy uncertainty on the ratio of current stock value to GDP as an indicator of the development of the Iran capital market during the years 1991-2018. To achieve this goal, first, using the Gregory-Hansen co-integration approach, the existence of a long-term relationship between the variables of the model was tested and then the experimental research model was estimated using the dynamic least squares method. The results of model estimation showed that there was a long-term equilibrium relationship between the variables, and the inflation rate and the uncertainty of economic policies have a negative impact. Also, other variables of the research, i.e., degree of economic openness, GDP, and private sector investment had a positive and significant effect on the Iran capital market development index during the study period.
Keywords
economic policy uncertainty
capital market development
structural break
Grigory- Hansen Co-integrating approach
dynamic ordinary least squares )DOLS(
International Journal of Nonlinear Analysis and Applications
Volume 14, Issue 1
January 2023
Pages 1835-1847

  • Receive Date 06 February 2022
  • Revise Date 08 March 2022
  • Accept Date 11 April 2022

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