The Effect of Monetary Policy Uncertainty on Stock Market Uncertainty with NARDL Approach

Abstract

The aim of this paper was to investigated the effect of monetary policy uncertainty on stock market uncertainty in Iran. In this paper, the positive and negative shocks of monetary policy uncertainty were calculated using nonlinear autoregressive distributed lag (NARDL) approach. The annual data of Iran's economy over the period 2000-2022 were used. The results of the linear and nonlinear models show that monetary policy uncertainty affects stock market uncertainty in the long-run. The ARDL model shows that monetary policy uncertainty increases stock market uncertainty in the long-run. The results of the nonlinear ARDL model show that monetary policy uncertainty shocks do not have an asymmetric effect on stock market uncertainty, and negative shocks have a positive effect on stock market uncertainty in the long-run.

Keywords: Uncertainty, Stock Market Uncertainty, Monetary Policy, NARDL Approach.

JEL Classification: D81, E37, E52.

DOI: 10.7176/RJFA/15-10-01

Publication date: November 30th 2024