Volume 21, Issue 1 (3-2026) J. Mon. Ec. 2026, 21(1): 51-80 | Back to browse issues page

keshtgar N, Zangane E, Mirjalili S H. The Effect of Exchange Rate and Financial Sanctions on the Return of the Tehran Stock Exchange Index. J. Mon. Ec. 2026; 21 (1) :51-80
URL: http://jme.mbri.ac.ir/article-1-727-en.html

The Effect of Exchange Rate and Financial Sanctions on the Return of the Tehran Stock Exchange Index

Nafiseh Keshtgar ^*¹

, Ehsan Zangane¹

, Seyed Hossein Mirjalili²

1- Assistant Professor of Economics, Faculty of Literature and Humanities, University of Birjand
2- Professor of Economics, Institute for Humanities and Cultural Studies

Abstract: (119 Views)

Exchange rate fluctuations and economic sanctions are recognized as two key factors in Iran’s economy that can have significant impacts on the country’s financial and product markets. This study examines the effect of exchange rate changes and the intensified financial sanctions on the return of the Tehran Stock Exchange Index using the time-varying parameter vector autoregressive (TVP-VAR) method. It allows for changes in parameters over time, providing flexibility in adjusting coefficients according to changes in conditions. The variables include Tehran Stock Exchange index return, exchange rate growth and financial sanctions. The data employed covers the period from 2011 to 2023 with monthly frequency. Impulse response function of the Tehran Stock Exchange returns to financial sanctions shock and to exchange rate growth shock are illustrated in the paper in different points of time. The results suggest that the increase in exchange rate led to a decrease in stock market returns between August 2013 and November 2015 and until September 2018. Therefore, the Tehran Stock Exchange index has experienced varying and asymmetric effects from financial sanctions and exchange rate fluctuations over different time periods.

Keywords: Exchange rate, financial sanctions, Tehran Stock Exchange Index, TVP-VAR model, Iran’s economy.

Type of Study: Original Research - Empirical | Subject: Macroeconomics
Received: 5 Aug 2025 | Accepted: 18 Nov 2025 | Published: 29 Mar 2026

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