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Designing a financial model to respond to stock returns to monetary policy shocks, credit risk and government governance
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Davoud Bazrafshan   , Farid Askari1 , Kambiz Hozhabrkiani |
| 1- , faridaskari@iau.ac.ir |
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Abstract: (1113 Views) |
In recent decades, the financial sector has entered a new intellectual era, challenging some of the assumptions about the rationality of investors. This has reinforced the idea that prices are determined by the influence of risk, monetary policy shocks, and psychological factors. Global economic experiences, especially in the last two decades, have proven that the economic stability of countries is dependent on the efficiency of their financial indicators. Financial crises, oil and monetary shocks in recent years stand as evidence of this claim. Money and capital markets, as the pillars of the financial sector, are responsible for providing resources for the real economy. The efficiency of the financial sector leads to the optimal allocation of scarce resources to economic activities. Optimal allocation, in turn, results in the efficient savings and investment processes, subsequently leading to national economic growth, approaching the potential capacity of the economy.This study presents a financial model of stock returns' responses to monetary policy shocks, credit risk, and government governance using the Structural Vector Autoregression (SVAR) model for the years 1996-2021. The research methodology is applied in terms of objectives and analytical-descriptive in nature, and it falls under post-event research. The model estimation is conducted for the period between 1996 and 2021. According to the results of the SVAR model estimation, a shock from the exchange rate causes an 89% increase in the stock price index. A shock from financial and liquidity crises results in a 53% and 11% increase in the stock price index, respectively. A shock from governance quality, credit risk, and central bank intervention causes a 86%, 3%, and 12% increase in the stock price index, respectively. |
Article number: 2 |
| Keywords: credit risk, monetary shock, crisis, government governance, stock returns, SVAR model |
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Full-Text [PDF 1146 kb]
(207 Downloads)
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Article type: Research |
Subject:
General
Received: 2024/09/16 | Accepted: 2024/12/22 | Published: 2025/05/26
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