Analyzing the Asymmetric Effects of Inflation and Exchange Rate Misalignments on the Petrochemical Stock index: The Case of Iran

Zarei, Samira (2020): Analyzing the Asymmetric Effects of Inflation and Exchange Rate Misalignments on the Petrochemical Stock index: The Case of Iran.

Abstract

While the petrochemical products and their revenues have been the most important part of Iranian non-oil exports, after imposing the international sanctions on Iran’s economy, these revenues, reflected in the petrochemical stock index, have fluctuated. In line with this, the effects of some main macroeconomic variables on the petrochemical stock index have become more crucial than before. Among the macroeconomic variables, inflation and exchange rate are the most effective. Hence, To investigate whether the exchange rate misalignments and inflation are significant indicators of changes in the petrochemical stock index, this paper has been applied the time series data from January 2012 to January 2020 and an asymmetric and non-linear framework, NARDL. The empirical results in addition to prove the existence of asymmetric and significant relationships between the research variables, confirm that the impacts of negative components of exchange rate misalignments and, conversely, positive components of inflation have been stronger than the effects of their decomposed counterparts both in the long run and short run.

• Item Type: MPRA Paper
• Language: English
• Keywords: Petrochemical Stock Index, Exchange Rate Mis-alignments, Inflation, NARDL Model
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and Simulation

References

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