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Transition and Propagations of Oil Shock in the Oil Exporting Countries: Lessons from Iran (in Persian)

Author

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  • Darab Molkabadi, Saeid

    (Department of Economic and Systems, Institute for Management & Planning Studies, Tehran, Iran.)

Abstract

The current research aims to answer the question as to by which channels the oil shock is transmitted to the stock market and how it spreads in the stock market. In this regard, the Factor-Augmented VAR approach, and also the global price index of commodity groups, macroeconomic variables, indices of large listed industries, and the total index of the Tehran Stock Exchange (for the period 2004-2016) have been used. Hence, the action-reaction functions are extracted in order to study the transmission mechanism of the oil price shock and its propagation in the stock market of Iran as an oil-exporting country. The findings show the impact of the oil shock on the stock market through three channels: (a) direct channels (b) global commodity price channels and (c) macroeconomic channels. Furthermore, based on the effects of the oil shock, the way of reaction from these channels is different. Accordingly, in the process of spreading the oil price shock in the stock market, the index of the group of petroleum products, chemical products, basic metals, metal ore extraction, multidisciplinary industrial, banking, and cement sectors, and consequently the total stock market index, increases significantly and steadily.

Suggested Citation

  • Darab Molkabadi, Saeid, 2023. "Transition and Propagations of Oil Shock in the Oil Exporting Countries: Lessons from Iran (in Persian)," The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی Ùˆ بودجه), Institute for Management and Planning studies, vol. 28(4), pages 111-139, December.
    • Handle: RePEc:auv:jipbud:v:28:y:2023:i:4:p:111-139
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    More about this item

    Keywords

    Oil Shock; Stock Market; FAVAR; Propagation Mechanism; Transmission Mechanism.;
    All these keywords.

    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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