Document Type : Original Article
Authors
1 Assistant Professor, Department of Economics and Accounting, Faculty of Management and Economics, University of Guilan, Rasht, Iran
2 Assistant Professor, , Department of Economics and Accounting, Faculty of Management and Economics, University of Guilan, Rasht, Iran
Abstract
Policymakers often create significant economic uncertainty when they fail to reach consensus on addressing a problem or when they repeatedly change economic policies. This process, known as economic policy uncertainty (EPU), can affect various sectors, including the stock market and its returns. Conversely, given that policymakers seek the results of their actions in the stock market and may be influenced by political pressures and vested interests, stock returns can also induce EPU. Therefore, investigating the relationship between EPU and stock market returns can reveal important policy implications. Accordingly, this study uses continuous wavelet transform and time-series data from 1990-2023 to analyze the relationship between EPU and stock market returns in Iran within the time-frequency domain. The results indicate that, in the short-run, medium-run, and long-run, stock market returns have historically caused EPU. However, this effect has ceased after the 2010s. Since the 2010s, an increase (decrease) in the effect of EPU has led to a decrease (increase) in stock returns.
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Main Subjects
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