Volume 11, Issue 39 (3-2020)                   jemr 2020, 11(39): 113-148 | Back to browse issues page


XML Persian Abstract Print


Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:

Rashnavadi Y, Norouzi H, Firoozansarnaghi T, Beigi S. Investigation Interaction between Exchange Rate and Stock Market in Iran: A Simultaneous Equation System Approach. jemr 2020; 11 (39) :113-148
URL: http://jemr.khu.ac.ir/article-1-1898-en.html
1- kharazmi university
2- kharazmi university , shahrokhbeigi68@gmail.com
Abstract:   (3565 Views)
In recent years, the development of Securities markets has contributed greatly to the flourishing and development of countries. Having a structured and dynamic capital market has been one of the basic requirements of countries on the path of development, and the role of this market in creating economic equilibrium is known to everyone. Therefore, explaining the volatility of the stock market is very important. Meanwhile, the interaction between the stock market and the exchange rate has been the subject of much research by many researchers. The exchange rate is a key variable that neglecting it can create problems and issues for the economy of any country in various dimensions. Therefore, the present study, by specifying a system of simultaneous equations, has examined the simultaneous interactions between the exchange rate and the stock market in Iran, using seasonal data from 2007 to 2017. The variables used in this system are the exchange rate, stock price index, gold price, oil price, liquidity, and consumer price index. The results of this study showed that the exchange rate has a positive and significant effect on the stock price index in Iran and as the exchange rate rises, the stock price index will also rise. Moreover, the stock price index has a statistically significant effect on the exchange rate in Iran. The results of estimating the model show that the effect of the stock price index on the exchange rate is negative and significant, i.e., as the stock price index increases, the exchange rate decreases.
Full-Text [PDF 1419 kb]   (905 Downloads)    
Type of Study: Applicable | Subject: پولی و مالی
Received: 2019/08/13 | Accepted: 2020/05/9 | Published: 2020/07/21

References
1.  - Abouwafia, H. E., & Chambers, M. J. (2015). Monetary Policy, Exchange Rates and Stock Prices in the Middle East Region, International Review of Financial Analysis, Vol.37, No.1, pp.14-28. [DOI:10.1016/j.irfa.2014.11.001]
2. Arfaoui, M., & Ben Rejeb, A. (2017). Oil, gold, US dollar and stock market interdependencies: a global analytical insight. European Journal of Management and Business Economics, 26(3), 278-293. [DOI:10.1108/EJMBE-10-2017-016]
3. Azarbayjani, K., Mobinidehkordi, M,. & Kamalian, A. (2018). Analyzing the Asymmetric Effects of Exchange Rate on the Stock Price Index of Tehran Stock Exchange: the NARDL Approach. Journal of Economics and Modelling, 8(32), 59-91. (In Persian).
4. Bakhshani, S. (2016). A Study of the Effect of Exchange Rate Changes on Stock Prices and P/E Ratio by Using SEM-PLS. journal of fiscal and Economic policies, 3 (12),149-164. (In Persian).
5. Bhuyan, A. K., & Dash, A. K. (2018). A dynamic causality analysis between gold price movements and stock market returns: Evidence from India. Journal of Management Research and Analysis, 5(2), 117-124. [DOI:10.18231/2394-2770.2018.0019]
6. Chkili, W., & Nguyen, D. K. (2014). Exchange rate movements and stock market returns in a regime-switching environment: Evidence for BRICS countries. Research in International Business and Finance, 31, 46-56. [DOI:10.1016/j.ribaf.2013.11.007]
7. Daei Karimzadeh, S., Honarvar, N. (2017). Evaluation of the Long-Term Relationship Between Crude Oil Prices, Gold Prices, House Prices and Exchange Rate in Iran Using the Structural Vector Error Correction Approach. Journal of Energy Economics Review, 13 (53), 135-164. (In Persian).
8. Damodar, N. Gujarati. (2011). Basic Econometrics. Translated by Abrishami, H. University of Tehran Press, Tehran. (In Persian).
9. Delgado, N. A. B., Delgado, E. B., & Saucedo, E. (2018). The relationship between oil prices, the stock market and the exchange rate: Evidence from Mexico. The North American Journal of Economics and Finance.
10. Dickey, D. A., & Fuller, W. A. (1981). Likelihood Ratio statistics for Autoregressive Time Series with a Unit Root. Econometrica, 49: 1057-72. [DOI:10.2307/1912517]
11. Dimitrios, A., Stephen, G. H. (2014). Applide Econometrics: A Modern Approach Using Eviews and Microfit. Translated by (Mohammadi, H., Karbasi, A., Ta'ali Moghadam, A), Ferdowsi University of Mashhad Press, Mashhad. (In Persian).
12. Heidari, H., Bashiri S. (2012). Investigating The Relationship Between Real Exchange Rate Uncertainty and Stock Price Index In Tehran Stock Exchange Using VAR-GARCH Models. Journal of Economic Modeling Research, 3 (9), 71-93. (In Persian).
13. Huang, S., An, H., & Lucey, B. (2020). How do dynamic responses of exchange rates to oil price shocks co-move? From a time-varying perspective. Energy Economics, 104641. [DOI:10.1016/j.eneco.2019.104641]
14. Inci, A. C., & Lee, B. S. (2014). Dynamic relations between stock returns and exchange rate changes. European Financial Management, 20(1), 71-106. [DOI:10.1111/j.1468-036X.2011.00621.x]
15. Jain, A., & Biswal, P. C. (2016). Dynamic linkages among oil price, gold price, exchange rate, and stock market in India. Resources Policy, 49, 179-185. [DOI:10.1016/j.resourpol.2016.06.001]
16. Namdari, H. (2014). Causal relationship between stock price index in Tehran Stock Exchange and exchange rate in free market. Master's Thesis. Allameh Tabatabai University. (In Persian).
17. Pan, M. S., Fok, R. C. W., & Liu, Y. A. (2007). Dynamic linkages between exchange rates and stock prices: Evidence from East Asian markets. International Review of Economics & Finance, 16(4), 503-520. [DOI:10.1016/j.iref.2005.09.003]
18. Pourebadolahan, M., Asgharpour, H., Zolghadr, H. (2015). Examining Relationship Between Stock Prices and Exchange Rate in Oil-Exporting Countries. Economic Development Policy, 2(4), 61-86. (in persian).
19. Rezaei, M., Yavari, K., Ezzati, M., Etesami, M. (2015). Analysis of the Effect of the Abundant Natural Resources (Oli & Gas) on Financial Repression and Economic Growth through the Income Distribution Channels. Iranian Energy Economics, 4(14), 89-122. (In Persian).
20. Saeidi, P., Koohsarian, A. (2010). The Investigation of the Relationship between Inflation Indexes (CPI & PPI) and Stock Return in Tehran Stock Exchange. Journal of Economic Research (Tahghighat- E- Eghtesadi), 44(4), 109-128. (In Persian).
21. Saleh, G. (2008). The dynamic relation between stock prices and exchange rates in Egypt, Saudi Arabia and UAE. University of Illinois at Chicago.
22. Sayadi, M., & Karimi, N. (2019). Modeling the Dependency Structure between Stocks of Chemical Products Return, Oil Price and exchange Rate growth in Iran; an Application of vine Copula, Journal of Economic Modeling Research, 10 (38), 45-94. (In Persian).
23. Simbolon, L., & Purwanto. (2018). The Influence of Macroeconomic Factors on Stock Price: The Case of Real Estate and Property Companies. In Global Tensions in Financial Markets (pp. 19-39). Emerald Publishing Limited. [DOI:10.1108/S0196-382120170000034010]
24. Singhal, S., Choudhary, S., & Biswal, P. C. (2019). Return and volatility linkages among International crude oil price, gold price, exchange rate and stock markets: Evidence from Mexico. Resources Policy, 60, 255-261. [DOI:10.1016/j.resourpol.2019.01.004]
25. Sui, L., & Sun, L. (2016). Spillover effects between exchange rates and stock prices: Evidence from BRICS around the recent global financial crisis. Research in International Business and Finance, 36, 459-471. [DOI:10.1016/j.ribaf.2015.10.011]
26. Tsai, I. C. (2012). The relationship between stock price index and exchange rate in Asian markets: A quantile regression approach. Journal of International Financial Markets, Institutions and Money, 22(3), 609-621. [DOI:10.1016/j.intfin.2012.04.005]
27. Vaezi, F. (2015). The Effect of Oil and Gold Price Shocks on Stock Market Returns. Master's Thesis. Faculty of Economics. Kharazmi University. (In Persian).
28. WEI, M.(2014). The Interaction Between Exchange Rates and Stock Prices (Unpublished doctoral dissertation). University of Birmingham, Birmingham, England.
29. Xie, Z., Chen, S. W., & Wu, A. C. (2020). The foreign exchange and stock market nexus: New international evidence. International Review of Economics & Finance, 67, 240-266. [DOI:10.1016/j.iref.2020.01.001]
30. Zare, H., Rezaei, Z. (2006). The Influence of Currency, Coin and Housing Markets on Tehran Stock Exchange Index Behavior Index: An Error Correction Model. Journal of Journal of Humanities Research, 21(2), 112-99. (In Persian).

Add your comments about this article : Your username or Email:
CAPTCHA

Send email to the article author


Rights and permissions
Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

© 2024 CC BY-NC 4.0 | Journal of Economic Modeling Research

Designed & Developed by : Yektaweb