Modeling the Impact of Money Market Variables on Tehran Stock Index: The Moderating Role of Economic Policy Uncertainty in ARDL Framework

Authors
Mohammad Kaveh Barahooei Jahanshahi
ali Barahooei Jahanshahi
mehdi Sadeghi Shahedani
Imam Sadiq university
Abstract
The present study aims to model and investigate the impact of money market variables on stock market performance (capital market). Money market variables can directly or indirectly affect stock market performance. This research examines the influence of interest rates, exchange rates, inflation rates, liquidity, and legal reserve rates on the stock price index. Additionally, another objective of this study is to investigate the effect of economic policy uncertainty on the relationship between monetary variables and the aggregate stock price index, and how monetary variables are guided and their impact on the stock market. The research period spans ten years, from 1392 to 1401. The hypothesis testing results, using seasonal time series data and the Autoregressive Distributed Lag (ARDL) model, indicated that the effect of money supply and exchange rate on the aggregate stock price index is positive and significant. However, the effects of the interest rate and legal reserve rate are not significant. Furthermore, based on an index for economic policy certainty, this research demonstrates that the relationship between the interbank interest rate, money supply, legal reserve rate, and exchange rate with the aggregate price index is influenced by economic policy uncertainty.

Keywords
Monetary Variables
Stock Market Index
Autoregressive Distributed Lag (ARDL)model
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