فهرست نشریات علمی دسترسی آزاد ایران

Purpose:The relationship between economic policy uncertainty (EPU) and stock market volatility is a challenging topic in financial literature. On one hand, empirical evidence has reported a phenomenon known as the "puzzle of severe economic policy uncertainty and low stock market volatility," which challenges theoretical foundations. On the other hand, some studies emphasize the existence of dynamic, bidirectional causality between these two variables. These ambiguities are particularly significant in the context of Iran's economy, which faces unique circumstances. The primary objective of this research is to provide new and comprehensive evidence to clarify these complex dynamics in Iran. Specifically, by disaggregating the relationship across time and frequency domains, this study aims to answer whether the direction and intensity of the causal link differ across short, medium, and long-term horizons and whether the aforementioned puzzle holds true for the Iranian economy.Methodology:This study analyzes data for the Iranian economy from 2008 to 2023, employing two innovative econometric approaches. To assess the time-varying causal dynamics, Rolling Window Granger Causality tests were conducted. This method is capable of identifying structural changes and instability in the causal relationship over time. Subsequently, the Continuous Wavelet Transform (CWT) technique was used for a simultaneous time-frequency domain analysis to disentangle the relationship across different time horizons. Through coherence analysis, this tool provides precise information about the intensity of co-movement and the direction of causality (i.e., which variable leads or lags) at short-term, medium-term, and long-term scales.Findings:The results from the Rolling Window Granger Causality tests confirmed a persistent unidirectional causal relationship from EPU to stock market volatility across the entire sample period. However, this relationship lost its statistical significance during the second half of the 2010s, providing strong evidence for the existence of the "uncertainty puzzle" in Iran. The wavelet transform analysis revealed that this relationship is highly dependent on the time horizon. In the short-run (less than 6 months), the relationship is unstable, and the causal flow is often out-of-phase (inverse), which confirms the existence of the puzzle in this horizon. In contrast, in the medium and long-run (more than 6 months), a stable, positive, and in-phase causal relationship from EPU to stock market volatility prevails. In other words, at these horizons, an increase in uncertainty significantly leads to higher stock market volatility, a finding that is perfectly consistent with classical theoretical underpinnings.Conclusion:This study concludes that the "puzzle of high policy uncertainty and low stock market volatility" is primarily a short-run phenomenon in the Iranian economy. While short-term market reactions can be counterintuitive, influenced by factors such as heightened risk aversion and reduced liquidity, the conventional positive and destabilizing impact of uncertainty on the stock market remains robust in the medium and long run. This differentiation across time horizons helps resolve existing contradictions in the literature. The findings imply that investors should adjust their strategies based on the time horizon of the market's reaction to policy shocks. For policymakers, it highlights the necessity of creating a transparent, stable, and predictable policy environment to ensure long-term financial market stability, as the adverse effects of uncertainty are unavoidable over time.