Author
Ph.D. Student, Economics, University of Isfahan
Abstract
Financial market is one of the most important markets in each economy. Stock exchange has a considerable role in transformation of saving to investment. In major industrial countries, Up and down of the stock exchange not only influence their national economy but also can affect world economy. Theoretically and practically it is known that there is a firm relation between monetary policy and the behavior of the stock exchange market. Hence, there should be a relation between monetary variables and stock price index. Study of these relationships in Iran’s economy is purpose of this article. Theoritical basis of the model rely upon portfolio and Fisher theories. Monetary variables such as M2, interest rate and foreign exchange rate can explain the fluctuations of stock price index. Long run relation for these variables is focus of our study. We tried to find a cointegration vector between these variables using ARDL approach. Results show that there is a firm and positive long run relation between TEPIX (Stock Price Index) and M2,and there is a negative relation between TEPIX and foreign exchange rate and there is a negative but weak relation between TEPIX and interest rate.
Keywords
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