Investigating the Effect of Stock Market Demand Side Shock on a Selection of Macroeconomic Variables in a Randomized Dynamic General Equilibrium Model

Document Type : Research Article

Authors

1 Associate Professor, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran.

2 Professor, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran

3 Ph.D. Student in Economics, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran

Abstract

The purpose of this paper is to investigate the effect of stock market demand side shock on a selection of macroeconomic variables with the approach of stochastic dynamic equilibrium (DSGE) models. For this purpose, data from the period of 1368-98 with seasonal frequency have been used. In general, capital market shocks can affect macroeconomic variables in two ways. The first route is household consumption expenditures and the second route is corporate investment expenditures. Therefore, the direct effects of stock price fluctuations on total expenditures have made the stock market known as a leading indicator in the economy and therefore have been considered in experimental studies. In this study, the shock from the capital market area is considered based on the market demand segment, in which the tendency of households to keep their assets in the form of stocks increases. The results show that private investment, production, inflation and consumption expenditures increase and interest rates decrease with the shock of a measure deviation from the demand side of the stock market.

Keywords

References

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Journal of Applied Economics Studies in Iran
Volume 10, Issue 39
September 2021
Pages 73-105

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