Asymmetric Effects of Exchange Rate Fluctuations on Stock Market Transaction Value: A NARDL Approach
Abstract
This study employs a Nonlinear Autoregressive Distributed Lag (NARDL) model to examine the asymmetric effects of exchange rate fluctuations on the value of transactions in the Tehran Stock Exchange. The data used in this research are quarterly observations spanning the period 2002 to 2024, collected from the Tehran Stock Exchange and the World Bank databases. In this study, exchange rate fluctuations are decomposed into positive and negative shocks, while the price-to-dividend ratio (P/D) and nominal per capita GDP are incorporated into the model as control variables. The results indicate the existence of a long-run equilibrium relationship, whereby positive exchange rate shocks significantly increase transaction value, whereas negative shocks do not exert a significant effect. The Wald test confirms the presence of long-run asymmetry. These findings highlight the asymmetric behavior of the capital market in response to currency fluctuations and underscore the necessity of adopting targeted policies to improve capital market management during periods of heightened volatility and uncertainty, as well as implementing stability-enhancing measures.