Financial stress and monetary policy uncertainty in Iran in recession and boom regimes

Document Type : Scientific paper

Authors

1 . PHD student in Economics/ Department of Economics/ Faculty of Economics and Accounting/ Razi University/ Kermanshah/ Iran

2 Professor / Department of Economics/ Faculty of Economics and Accounting/ Razi University/ Kermanshah/ Iran

3 Associate Professor/ Department of Economics/ Faculty of Economics and Accounting/ Razi University

Abstract

In this study, we seek to test Financial stress and monetary policy uncertainty in Iran in recession and boom regimes. For this purpose, using the Principal Component Analysis (PCA) model in the first section, the financial stress index is calculated, and in the second section, by employing the Markov Switching (MS) regime-switching model, the effects of study variables during the period from 2001 to 2022 are investigated seasonally. Based on the weights obtained for the financial stress index, the monetary and financial sector has the greatest effect on creating financial stress. Based on the results of calculating the financial stress index, Iran's economic stress capacity is high. And the highest level of stress in Iran's economy is related to the first quarter of 2018, the first, third and fourth quarter of 2017, the first quarter of 2012 and the second quarter of 2013. The lowest financial stress is the first season of 2015, the second and third season of 2019, the first season of 2011 and the third season of 2013. Also, based on the results for one unit increase in financial stress and oil price, respectively; 53 and 54 units, monetary policy uncertainty increases. Also, the volume of trade during the boom period leads to a 13-point decrease in monetary policy uncertainty.

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Macroeconomics Research Letter
Volume 19, Issue 43
November 2025

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History

  • Receive Date: 06 May 2024
  • Revise Date: 29 June 2024
  • Accept Date: 08 July 2024

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