Sanctions and Iranian Stock Market: Does the Institutional Quality Matter?

Roudari, Soheil and Ahmadian- Yazdi, Farzaneh and Arabi, Seyed Hadi and Hammoudeh, Shawkat (2022): Sanctions and Iranian Stock Market: Does the Institutional Quality Matter? Published in: Borsa Istanbul Review , Vol. 23, No. 4 (21 March 2023): pp. 919-935.

Abstract

The effect of shocks of sanctions, oil revenues, exchange rate, and inflation on different regimes of the Iranian stock market is examined in the two cases (with and without considering institutional quality (IQ)) during the 1984-2020 period, using the TSVAR model. The results show that the difference between the impulse-response functions in the bullish and bearish market, with and without considering IQ, is only related to the effects of sanctions and inflation, respectively. In fact, considering the IQ case, inflation has a medium-term positive effect on the stock market; however, without the IQ there has only been a positive short-term effect. Accordingly, within increasing sanctions, if the IQ has been also enhanced, a positive shock of sanctions will lead to a long-term improvement in the bullish market. Also, in the bearish market, the positive shock of sanctions and exchange rate, along with increasing IQ, will lead to a long-term growth in the Iranian stock market.

• Item Type: MPRA Paper
• Language: English
• Keywords: Sanctions, Stock Market, Institutional Quality, TSVAR Model
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C24 - Truncated and Censored Models ; Switching Regression Models ; Threshold Regression Models; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F51 - International Conflicts ; Negotiations ; Sanctions; G - Financial Economics > G2 - Financial Institutions and Services > G29 - Other

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