Click for new scientific resources and news about Corona[COVID-19]

Paper Information

Journal:   THE ECONOMIC RESEARCH   FALL 2012 , Volume 12 , Number 3; Page(s) 133 To 163.
 
Paper: 

INFLATION RATE AND THE PERFORMANCE OF FINANCIAL MARKETS IN IRAN

 
 
Author(s):  FALAHATI ALI*, SOHAILI KIOMARS, NOORI FARZAD
 
* RAZI UNIVERSITY
 
Abstract: 

Achieving a high and sustainable economic growth has always been the main target of economic plans in different countries. Proving a positive relationship between financial development and economic growth by many studies has convinced the researchers to study the effective factors on the growth and development of financial markets. Inflation is one of the main factors that have a great impact on the countries’ financial development. So, the focus in the studies has mainly been on explaining the form of relationship between inflation and financial development. In this paper, the relationship between inflation and financial market development in Iran during 1978 to 2007 for the money market and during the summer of 1999 to spring of 2008 for the capital market has been reviewed. Econometric model of this research has been specified according to Boyd, Levine and Smith model (2001). Firstly, a simple linear model is used for controlling other economic factors that may be correlated with financial market performance. Then, a threshold regression is handled for explaining the nonlinear relationship between inflation and financial market development. In this model, different thresholds that limit inflation are considered. Conditional least squares method (CLS), is applied for estimating the model. The threshold limit for inflation has been determined based on the minimum error sum of squared criterion. The results of the estimated model indicate that a negative relationship between inflation and financial development indexes of money market. This positive relationship also exists between inflation and stock market development indexes. In the same way, the output of the estimated models has shown that in the some domain of inflation, the negative relationship between inflation and financial development indexes of money market is not significant. In addition, the results of the estimated models revealed that there is no a threshold limit for the impact of inflation on the stock market.

 
Keyword(s): INFLATION, FINANCIAL MARKETS, MONEY MARKETS, CAPITAL MARKETS, FINANCIAL DEVELOPMENT, THRESHOLD
 
References: 
  • ندارد
 
  Persian Abstract Yearly Visit 73
 
Latest on Blog
Enter SID Blog